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Concerned over the slowing growth of the economy, bankers have unanimously called for a cut in interest rate and cash reserve ratio in their pre-policy consultative meeting with the Reserve Bank of India top brass.
The central bank last cut the key policy rates by 50 basis points in April. Subsequently, it also cut CRR, the slice of deposits banks keep with the RBI, by 50 basis points in two tranches.
“Bankers felt that even as inflation concerns remain, growth is a bigger concern. While we understand the issues related to inflation, it was our recommendation that there should be a rate cut and a CRR cut,” Aditya Puri, Managing Director, HDFC Bank, said.
RBI holds pre-policy consultative meet with different stakeholders to gauge their views prior to every policy. The third quarter monetary policy review is scheduled on January 29.
The central bank had hinted in its mid-quarter review in December that it might start cutting key policy rates in the January-March quarter.
High inflation, which has been holding back the RBI from cutting interest rates, moderated to a three-year low of 7.18 per cent in December.
CREDIT to small units
In another meeting with RBI Deputy Governor K.C. Chakrabarty, bankers were told that they need to increase the flow of credit to micro, small and medium enterprises (MSMEs).
According to a banker, the RBI has told banks that if MSMEs require restructuring, it should be considered.
“Banks should have a mechanism to monitor and sanction restructuring cases. The turnaround time should be less. There should be proper tracking of the loans,” the banker quoted the RBI as telling banks.
RESTRUCTURED ASSETS
Bankers also said they had requested the RBI to stagger the provisioning on restructured assets over a period of time, informed K. R. Kamath, Chairman and Managing Director, Punjab National Bank, and Chairman, Indian Banks’ Association.
In its October review, the RBI had proposed to increase the provisioning on restructured assets by 0.75 per cent from the then existing 2 per cent.
This would have ensured that banks set aside Rs 2.75 for every Rs 100 loan restructured.
>satyanarayan.iyer@thehindu.co.in
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