Mr K.R. Kamath

Our Kolkata bureau reports: Mr K.R.Kamath, Chairman and Managing Director, Allahabad Bank, said, “There was some pressure on liquidity. Deposits were being taken at higher rates to meet the liquidity demand. The CRR cut will ease this pressure.”

Mr T.M. Bhasin, Executive Director, United Bank of India, said, “A lot of liquidity constraints were there which will now be offset partially. Banks have been borrowing between Rs 50,000 crore and Rs 70,000 crore through repo on a daily basis. The cut in CRR will also help augment the profitability of banks to a small extent, since they don’t earn interest on CRR balances.”

Mr V.K. Dhingra, Executive Director, UCO Bank, said, “There will be some temporary relief, but the 50 bps cut in CRR may not totally offset the liquidity crunch. A lot of bulk deposits are likely to mature soon and this will probably ease things a bit. The credit demand has been high and we have not been able to meet the demand because of liquidity pressure.”

Our Hyderabad bureau reports: “The cut in CRR at the crucial time sends right signals to the banking industry and financial markets that the central bank has taken note of serious liquidity crunch in the market,” Mr R.S. Reddy, Chairman and Managing Director, Andhra Bank, said. “The cut will inject over Rs 2,000 crore ($4.2 billion) into the market and it remains to be seen how this eases the liquidity shortfall. The central bank, I feel, would monitor the implications of the cut in the next three/four days and may take a suitable decision on measures to be taken in the policy due later in the month. The increase in inter-bank call rates and the difficulties of the banks in funding the projects, which have been sanctioned, might have influenced the RBI to intervene in the market barely two weeks prior to the policy announcements. Broadly, this is the right move.”

Our Mangalore bureau reports: Welcoming the RBI’s move to reduce CRR, Mr B. Sambamurthy, Chairman and Managing Director of Corporation Bank, told Business Line that it is a well-needed measure. This will improve the much-needed liquidity. It is good for the system. The rates should cool off a little.

He said globally liquidity is one of the major issues. Ultimately it will help the real economy get more funds. Added to this, inflation is under control and the trend is also downward. That is a comfort, he said.

Mr Ananthakrishna, Chairman and Chief Executive Officer of Karnataka Bank Ltd, said: “For credit expansion there has been an impediment, particularly for banks which are having high CD ratio.”

“Inflation, which appears to be under control, is slowly showing a declining trend. “I think, against that background this 0.5 per cent reduction in CRR has been announced,” he said.

Our Mumbai bureau reports: The Reserve Bank of India’s move is a very welcome and pro-active move and will ease the liquidity in the system. The RBI is trying to achieve a balance between managing inflation and maintaining growth levels, said Ms Chanda Kochar, Joint Managing Director, ICICI Bank. It is difficult to predict what further measures the RBI will take in its October credit policy.

The decision will depend on global liquidity conditions, inflation levels and dollar rupee movement, Ms Kochar said.

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