Mumbai: The Reserve Bank of India has announced additional steps to infuse liquidity, including relaxation in overseas borrowing limit for banks, even as the government announced a slew of measures to bolster the credit market.

''Banks will be allowed to borrow funds from their overseas branches and correspondent banks up to a limit of 50 per cent of their unimpaired Tier I capital as at the close of the previous quarter or $10 million, whichever is higher, as against the existing limit of 25 per cent,'' the RBI said in a release.

The RBI is expected to raise the external commercial borrowing  (ECB) limit for corporates, finance minister P Chidambaram said.

He said the RBI will soon announce an increase in the limit on external commercial borrowings, which help the corporate sector to access the financial markets overseas.

He said the RBI governor D Subbarao was working out details of the measures agreed upon between the government and the central bank.

RBI, the minister said, would also immediately release Rs25,000 crore to the commercial banks, cooperative banks and RRBs under the farm loan waiver scheme. Out of this Rs7,500 crore will be provided to commercial banks and Rs17,500 to Nabard.

The series of announcements came after the stock markets tanked again after two days of gains. The Bombay Stock Exchange sensitive index lost 674 points and close below the 11000 mark.

Chidambaram, along with the RBI governor and deputy chairman of the Planning Commission Montek Singh Ahluwalia, had briefed the prime minister last night on the measures taken so far. The three also reviewed developments and measures taken by other countries, Chidambaram said.

The RBI yesterday conducted a special fixed rate 14-day repo at 9 per cent per annum against eligible securities for a notified amount of Rs20,000 crore with a view to enabling banks to meet the liquidity requirements of mutual funds.

Banks are reported to have used up Rs3,500 crore of this facility.

The 14 day repo facility will now be conducted everyday until further notice up to a cumulative amount of Rs 20,000 crore for the same purpose, an RBI release said.

The average daily volume in the overnight call money market, at about Rs14,000 crore in October has in fact been somewhat higher than those observed in the previous six month period, the RBI noted, adding that the continuing uncertain global situation might have an indirect impact on our financial markets. 

''The Reserve Bank is monitoring developments in the financial markets closely and continuously and would respond swiftly and even pre-emptively to any adverse external developments impinging on domestic financial stability, price stability and inflation expectations,'' the release said.