There was 'perhaps' need for further reduction in reserves set aside by banks through cash reserve ratio or statutory liquidity ratio, said the Reserve Bank of India Governor, Duvvuri Subbarao, said today at a banking conference organised by FICCI in Mumbai today.
The cash reserve ratio, or the slice of bank deposits parked with the RBI, stands at a record low of 4 per cent. Meanwhile, SLR, which includes securities such as government bonds, stands at 23 per cent.
Last month, the RBI tightened monetary conditions by raising short-term interest rates and squeezed cash in a bid to defend the rupee volatility. However, the currency has weakened further, citing concerns the central bank would need to either raise the CRR or raise the key repo rate.
The rupee fell to 61.31 against the dollar post the governor's comments. The yield on benchmark 7.16 per cent Government security rallied to 8.33 per cent. While, the price of the security fell to 92.17.
A treasury official of a private bank however, said, "The RBI must wait for rupee to stabilise before reducing the CRR or SLR."