The CRR cut may not yet allow banks the elbow room to think of a cut in interest rates, says Mr Abheek Barua, Chief Economist, HDFC Bank.
It has been an extreme case of liquidity crunch and a one-time infusion of Rs 32,000 crore doesn't really help, he told Business Line .
The liquidity deficit has been variously estimated to be in the region of Rs 1.5 lakh crore.
GOVT PAPER
And there are lots of Government papers sloshing around with ravenous appetite to mop-up any incremental liquidity.
Open Market Operations (OMOs) have not been enough to fill the huge liquidity gap. Mr Barua does not expect the ‘combo play' of a CRR cut and OMOs to make much difference to the situation.
But Dr D.K. Joshi, Chief Economist at rating agency Crisil, was of the view that a mix of OMOs and CRR cut could do the trick.
If it doesn't, the RBI can always go for additional cut in the CRR, the most potent instrument that can inject permanent liquidity.
NO SUPRISE
The CRR cut did not surprise him, since some easing of the liquidity situation was warranted.
This is clearly one step towards a more concrete action of policy rate cuts in the next policy.
Dr Shubhada M. Rao, President and Chief Economist of YES Bank, said that the CRR cut is in line with expectation.
“I think our call has come right in line with what has eventually happened. We did see structural kind of factors creeping into the liquidity deficit,” she said.
Growth, particularly investment-led growth, is the larger concern today, and this is what the RBI seeks to address.
FISCAL POLICIES
Stressing the need to provide an impetus to investments, she said this obviously cannot be done in isolation.
This needs to be comprehensively backed by policies at the Government level.
“If the Government shows its intent through Budget, then some complementarity will have been achieved. The RBI can back it up with a cut in repo by 50 basis points.
“There are no nasty surprises on inflation yet. The RBI has not hurried on call on repo rate, given the upside risks,” she said.
If the inflation does pan out the way it is anticipated and limits itself to below seven per cent, the RBI may have built up a case for cutting the repo rate in March.