Markets: Eerie calm

Markets: Eerie calm

it is not clear when market sentiment can change; as in the past, it can be quite sudden.
At a turn and yet not

At a turn and yet not

RBI could be tempted to cut policy rate to support growth at its bi-monthly review.

CRR, SLR could come down further, says RBI Guv D Subbarao

Aug 13 2013, 14:56 IST
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I do recognise that there is a demand, and perhaps a need, for further reduction: Subbarao I do recognise that there is a demand, and perhaps a need, for further reduction: Subbarao
Summary'I do recognise that there is a demand, and perhaps a need, for further reduction.'

Outgoing RBI Governor D Subbarao, who had disagreed with bankers' call to further trim the cash reserve ratio (CRR) or pay interest on these deposits, and cut Statutory Liquidity Ratio (SLR), today said "perhaps" there is a need to reduce these rates.

If RBI can't cut CRR, let them pay us interest on it, says SBI

"I do recognise that there is a demand, and perhaps a need, for further reduction (in CRR and SLR)," he told the FIBAC summit, the premier annual banking summit here.

The Governor, however, added RBI has "progressively" brought down mandatory ratios on both CRR, or the portion of deposits banks park with RBI as a solvency buffer, and SLR, another solvency tool under which banks have to subscribe to government bonds and other liquid assets, over the years.

Subbarao, after a five-year tenure, will demit office on September 4 and new Governor Raghuram Rajan will assume office the next day.

Currently, the CRR is pegged at a low of 4 per cent, while SLR that includes securities such as government bonds, stands at 23 per cent, down from 25 per cent in 2010.

There have been demands from bankers for further reduction of CRR.

Describing CRR as "dead money", SBI Chairman Pratip Chaudhuri had earlier said that if RBI could not reduce this requirement further, at least banks should be paid interest on this deposit.

While RBI has brought down short term lending rates by 125 bps since March 2012, there was only a 30 bps reduction by banks in their lending rates, as they have to attract deposits by paying high interest rates.

Also read: RBI imposes Rs 5.6 lakh fine on SBI for violation of norms

Also read: Bad loans cast shadow on SBI, Q1 net down 13.61%

Though CRR and SLR have been retained at low level, to prop up rupee availability, the RBI since last month has increased the call money rates by 300 bps to 10.25 per cent.

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