The cut in SLR would provide some leeway for banks to lend to private sector.
Mr Biswa Swarup Misra, Associate Dean of Xavier Institute of Management, told this to Business Line on the RBI’s move to cut SLR by one per cent in its first quarter policy review for 2012-13.
He said SLR cut will release resources for the disbursement of credit.
Stating that the Government borrowing is also at a very high level, he said liquidity is an issue. Corporate sector is also not willing to invest. “In this kind of a scenario, even if you reduce SLR, it will not be going to see a major credit offtake,” he said.
All said and done, when NPA becomes an issue banks tend to go in for safe bet of government securities. There is also a supply of government securities because the government borrowing programme is high.
“I would say that compared to a reduction in CRR, at least, banks have some leeway to lend to private sector with SLR reduction,” he said.
Stating that there is a drought in the US, he said global food prices are again coming under pressure. “Our monsoon is also facing deficit. That would have weighed down on RBI in deciding to go for a pause,” he said.
If it is the bad monsoon, things are going to be much more complicated. It would have ramifications on the projected 6.5 per cent growth, he said.