Bankers, in their pre-policy meeting with the Reserve Bank of India (RBI) on Thursday, asked for a 50 basis points cut in the cash reserve ratio (CRR) and a further reduction in the repo rate, the indicative policy rate of the central bank.
“We have asked for a 50 basis points (CRR) cut. The deposit growth has been slightly lower than the RBI expectation (of 15 per cent growth), with liquidity remaining tight,” said S. Mundra, Chairman and Managing Director, Bank of Baroda, after meeting the RBI officials. While the wish-list includes CRR reduction and a cut in repo rate, looking at the present situation, there was more of an emphasis on a CRR cut.CRR, the portion of deposits that banks are required to maintainwith the RBI, is at 4 per cent now. The repo rate, the rate at which banks borrow funds from the RBI, is at 7.50 per cent.
“It was divided among the bankers (on expectations of CRR or repo rate cut)...some wanted a CRR cut and others said open market operations (OMOs) could be conducted to meet the liquidity requirements,” said Vijayalakshmi Iyer, Chairperson and Managing Director, Bank of India.
“Bankers were concerned that there hasn’t been really much off-take in credit from the corporate side...there is a slowdown in the consumption demand and on the retail front too. In the light of that, all of us felt that there has to be a pick-up in the confidence levels in the economy,” she added. The RBI will announce its Annual Monetary Policy on May 3. Before meeting the bankers, the RBI officials also had a meeting with various trade bodies.
