The Hindu Business Line : RBI keeps options open on cash reserve ratio

THE Reserve Bank of India has hinted that it is keeping its options open regarding the level of Cash Reserve Ratio maintained by banks and might even raise the level if necessary.

"While the CRR reduction over the last few years has been consistent with the objective of reducing it to the statutory minimum level of 3.0 per cent, the RBI could continue to use the instrument in either directions, for liquidity management, taking into account the liquidity conditions, inflation trends and other macroeconomic developments," the Central bank has said, in its report on the Trend and Progress of Indian Banking, 2002-03.

The apex bank has highlighted, that reserve requirements were increased temporarily in 1997 to combat pressures arising from contagion from the East Asian financial crisis. However, as part of the medium-term objective of reducing CRR to its statutory minimum and also to step up lendable resources of the banks to support real activity,

CRR was reduced by as much as 400 basis points over the last three years with a reduction of 25 basis points since June 2003.

Rationalisation of CRR and its maintenance facilitated reducing reliance on reserve requirements, even while retaining it as a monetary tool.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Do poor have space in bankers' schemes?

Rupee down by 12 paise; gilts slide

Indian Bank net up at Rs 116 cr in first half

Special offer from Can Fin Homes

`Bogus claims' before Motor Accidents Claims Tribunal — TN Govt directed to probe incidences

S&P affirms `BB' rating for Tata Power

Guard against rate risk, RBI tells banks

RBI projects 7% growth

RBI keeps options open on cash reserve ratio