Financial Daily from THE HINDU group of publications
Tuesday, Sep 14, 2004
Financial Daily from THE HINDU group of publications Tuesday, Sep 14, 2004 |
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Opinion
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Letters CRR hike
This is with reference to "RBI tightens liquidity to curb inflation" and "Fall in bond prices feared" (Business Line, September 12). Though the apex bank decided to limit the CRR to 3 per cent earlier in terms of the 2002-03 annual policies, compelling reasons led to the hike to 5 per cent from the running rate of 4.5 per cent. The eventual drain is calculated at Rs 8,000 crore, whereas the market is liquid to the tune of Rs 40,000 crore. Hence, it is not known whether the CRR hike will effectively curtail the power to create credit. The commercial banks may, of course, replenish the reserve funds through sale of government securities in the market. The fear that bond prices may fall in the wake of excess market liquidity may prove true. C. P. Velayudhan Nair Kochi Letters to the editor and contributions can be sent by e-mail to: bleditor@thehindu.co.in
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