The Hindu Business Line : RBI’s move to improve liquidity

The 100 basis point cut in the repo and reverse repo and 50 basis point cut in the CRR clearly signal that the Reserve Bank wants to improve the liquidity in the system. Banks will now have to lower their rates, Mr V.S. Reddy, Managing Director, Lakshmi Vilas Bank, said. He admitted that private sector banks have not done much on these lines in the past, while the public sector banks went ahead announcing a cut in their lending rate. “We raised dep osits at high rates, so could not bring down the lending rates immediately. No, we will have to lower the rates,’ he said, adding ‘it will be known within the next 4 to 5 days.” The Managing Director of Karur Vysya Bank, Mr P.T. Kuppuswamy, said the RBI left no stone unturned and was straining every nerve to give a big push to the economy. ‘If the credit growth does not pick up, the RBI can even think of closing the Reverse Repo window or bring ceiling limits. The decrease in the CRR will help banks improve their profits, albeit marginally. Earlier, the rise and fall in interest rates used to have a long time lag. But now, the cyclical turns are happening at a faster pace, and in the larger interest of the nation, banks would have to be more flexible, he said.

— Our Bureau

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