The Hindu Business Line : Banks may lose about Rs 1,500 cr CRR income

The banking sector will lose nearly Rs 1,500 crore that it could have potentially earned from the Reserve Bank of India, following the amendments to the RBI Act. That is about 6 per cent of the profits earned in 2005-06.

Banks, hitherto, got paid interest of 3.5 per cent by the RBI on the "eligible balances" they maintained in excess of the statutory minimum cash reserve ratio (CRR). The statutory minimum CRR was three per cent, while the prescribed CRR ratio that is now in force is five per cent. Banks would not get anything for the minimum three per cent CRR but get paid 3.5 per cent on the extra two per cent CRR that they maintained with the RBI.

Based on the deposit figures of about Rs 2,087,670 crore as of March 31, banks would have been required to keep about Rs 1,04,383 crore with the RBI as CRR. This was Rs 41,753 crore more than what these banks would have maintained if the CRR had been three per cent. On this Rs 41,753 crore, banks would have got paid 3.5 per cent or about Rs 1,461 crore in the normal course. Now the RBI has removed the statutory floor and ceiling limits on CRR and would, therefore, not have to pay them anything.

Based on their March 2006 deposit figures, SBI would lose about Rs 280 crore, Punjab National Bank about Rs 84 crore, Canara Bank about Rs 80 crore, while Bank of India and Union Bank of India would lose about Rs 51 crore each.

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