The country’s top bankers pitched for a cut in the Cash Reserve Ratio (CRR) with the central bank amid concerns on slowdown in credit growth.
Bankers met Reserve Bank of India top brass on Friday for a consultation on the upcoming monetary policy.
RBI meets various stakeholders to take their views into account before the monetary policy review. The second quarter review of monetary policy is scheduled for October 30.
“I have demanded that CRR be reduced by 150 basis points because it is an anathema. It should be done away with,” said Pratip Chaudhuri, Chairman, State Bank of India. “If repo rate is cut by 50 basis points then it will boost the sentiments.”
CRR is the slice of deposits that banks are required to keep with the central bank. RBI uses CRR to manage liquidity in the banking system. Currently, the CRR is at 4.50 per cent. The RBI reduced CRR by 0.25 per cent in its mid-quarter policy review on September 17.
Bankers said that they have passed on the last cut in CRR to customers.
“We mentioned (to the RBI) that most of the banks have transmitted last time’s monetary policy decision to the customers in terms of both base rate cut as also cut in interest rates,” Chaudhuri said.
Indian Banks’ Association Chairman K.R. Kamath said a CRR cut will help to cut the cost (of funds) directly and that is “preferable.”
Kamath, who is also the Chairman and Managing Director of Punjab National Bank, said the banks will pass on any reduction in policy rates to their customers.
Bankers said the RBI expressed concern on slowdown in credit growth and asset quality of banks.
“We told them that there is growth only in retail loans and there is no growth in corporate loans,” Chaudhuri added.
ICICI Bank Managing Director and CEO Chanda Kochhar said “Clearly the credit growth has settled in the 16 per cent range”.