The Reserve Bank of India could give support to the banking system either through a cut in cash reserve ratio or by reducing the amount of investment banks need to make in government securities, said the Indian Overseas Bank Chairman and Managing Director, M. Narendra.
Such a move could bring down the cost of funds for banks. In turn, lending rates could come down.
Cash reserve ratio is the slice of deposits banks have to park with the RBI.
Currently, it is at 4.75 per cent of deposits. The level of investment banks need to make in government securities (or statutory liquidity ratio) is pegged at 23 per cent of deposits.On the requirement of capital as per Basel III norms, the Indian Overseas Bank Chairman said: “We are comfortable in the first two years. From the third year onwards, we need cumulatively Rs 22,640 crore till 2018 with a credit growth of around 18-20 per cent.”