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Bankers on Monday sought liquidity easing measures from the Reserve Bank of India so that they can cut lending rates.
A cut in the cash reserve ratio (CRR) or the policy rates is what the bankers have pitched for at their customary pre-monetary policy meeting with the central bank brass. However, the bankers did not disclose the quantum of rate cuts they demanded.
The first-quarter monetary policy review is scheduled on July 31. The RBI’s policy-setting meeting will be in the backdrop of slow growth and high inflation.
Credit growth sluggish
“We discussed the credit and deposit position with the Reserve Bank. Credit growth has been sluggish,” said Mr D. Sarkar, Chairman and Managing Director, Union Bank of India
Mr Alok Misra, Chairman, Indian Banks Association, and CMD, Bank of India, said cost of deposits needs to come down for effecting a rate cut.
Bankers indicated that a CRR cut is more conceivable. Given the high rate of inflation, it is less likely that the central bank will cut policy rates.
CRR is a portion of total deposits that a bank has to keep with RBI. Currently, the CRR is at 4.75 per cent. Any reduction in CRR will leave banks with more funds in hand, which they can lend.
The repo rate, or the rate at which banks borrow from the RBI, is at 8 per cent. A higher repo rate precludes banks from bringing down lending rates.
“We should save the industry, if we can,” Mr Misra said. Industry has been demanding a cut in both CRR and policy rates.
Inflation focus
The RBI Governor, Dr D. Subbarao, had said last month that containing inflation continues to be a priority for the central bank.
The RBI has targeted an inflation rate of 6 per cent in FY-13.
>satyanarayan.iyer@thehindu.co.in
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