The Hindu Business Line : ‘Credit situation may improve’

The 100 basis points cut in CRR will inject additional liquidity into the system and is expected to ease the credit situation to some extent, according to Mr V.K. Dhingra, Executive Director, UCO Bank.

“The cash crunch had put some restrictions in the lending activities of banks. The 100 basis points cut in CRR will release some cash into the system and ease the credit situation to some extent,” he said. The relaxation on SLR would also help banks to borrow additional funds from the RBI under the repo facility, Mr Dhingra pointed out. According to Mr K Harihar, Executive Vice-President, Head (Treasury and Financial Institutions), Development Credit Bank, there was cash shortage of about Rs 55,000 crore in the system inspite of the injection of Rs 60,000 crore worth liquidity post the 150 basis points cut in CRR. “The additional CRR cut, coupled with the injection of Rs 25,000 crore as the first instalment under the debt waiver will immediately pump in Rs 65,000 crore. The auction announced for Rs 10,000 crore will also help ,” said Mr Harihar.

The RBI’s measure of cutting the CRR by 100 basis points and allowing banks to borrow upto 50 per cent of their networth from their overseas branches and correspondent banks, up from 25 per cent earlier is a welcome relief to banks, according to Mr J. P. Dua, Executive Director, Allahabad Bank.

“This is a busy season and there is a lot of demand for credit from corporates. Liquidity was, however, locked up in CRR. The 250 basis points cut in CRR (150 bps earlier and another 100bps now) will help release cash into the system thereby improving the liquidity condition and the credit situation,” said Mr Dua.

— Our Bureau

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