State Bank of India Chairman Pratip Chaudhuri has underscored the importance of having a debate on doing away with the Cash Reserve Ratio and the need to adjust rules in accordance with changing times.
“This (doing away with CRR) should not be the only view…there should be more discussion on this,” Chaudhari said here on Monday.
CRR is the slice of deposits that banks are required to keep with the Reserve Bank of India. Currently, banks need to park Rs 4.75 for every Rs 100 deposit they collect.
The SBI chief said there are three reasons why the CRR should go.
Firstly, CRR hurts the national economy; secondly, the funds parked with the RBI as CRR does not earn any interest for banks, and thirdly, when insurance companies, NBFCs and mutual funds are not required to keep any CRR, it is the banks that are subjected to unfair treatment.
Referring to the fact that the Government amended the RBI Act in 2007, doing away with interest on CRR, Chaudhari said“Rules should change along with changing times.The laws cannot be rigid…even the Constitution of the country has been amended more than 90 times.”
Controversy
Chaudhuri’s comment on phasing out CRR had sparked a controversy last week with the RBI Deputy Governor K. C. Chakrabartymaking a strong statement that “If the SBI Chairman is not able to do the business in this regulatory environment, he has to find out some other place.”
The SBI chief observed that while some are saying that CRR cannot be done away with, no one is giving the rationale why it cannot be done.
CAR LOANS DISBURSALS UP
Chaudhuri said his bank’s car loan disbursals have gone up after the interest rate was reduced by 50 basis points to 10.75 per cent on August 1.
In August, the bank’s car loan disbursal rose to Rs 972 crore from about Rs 550 crore, a year ago.