The banks, which are facing pressure on their margins after the Reserve Bank of India (RBI) decided to hike cash reserve ratio (CRR) by 50 basis points in its mid-term review of monetary policy announced on Tuesday, have urged the banking regulator effect this hike in only incremental deposits.
The bank chiefs, who had met YV Reddy, governor of RBI, at the time of announcement of the mid-term policy, had appealed to the governor to apply such a CRR hike on incremental deposits. RBI intends to suck out liquidity from the system as a whole which includes many more constituents other than banks. Banks per se are not flooded with any surplus of liquidity. The banks are raising their deposits with a high cost, said a Mumbai based chairman and managing director of a state owned bank.
?Where are the liquidity with the banks? All the liquidity are directed towards stock market,?? averred the CMD of the state-owned bank.
The RBI is which had decided to apply CRR hike from November 10 is yet to respond to the bankers suggestions.
However, analysts point out that it is unlikely that the central bank would agree to the bankers suggestions as the central bank has raised alarm over the kind of capital flow happening for the country. According to the RBI, the proposed CRR hike would suck out Rs 16,000 crore of liquidity out of the over Rs 30,000 surplus liquidity.
Also, Reddy has pointed out such a capital flow whose sterlisation is expanding the money supply rapidly is prepared to use other tools as and when the situation arises to further clamp down on the liquidity to check rupee rise and inflation.
Banks take up deposit issue with RBI
Finding themselves in a piquant positions the bankers have taken up the issue of withdrawing all the special deposit schemes with lock-in period as instructed by the RBI in one of its recent circular last week.
Almost all the banks have a special deposit scheme with five year lock in period which can avail tax concessions and was announced in one of the recent Budgets.
?We donot pay any interest rates in these schemes if there is any pre-matured withdrawal by the depositor,?? said H Daruwala, chairman & managing director, Central bank. Now the recent notification by the RBI to withdraw such deposits would affect these schemes which were earlier allowed by the centre. Bankers expect ministry of finance would soon talk to the RBI to resolve the issue.