Struggling with slow growth in loans, bankers on Thursday demanded a 0.50 percentage-point cut in banks’ cash reserve ratio (CRR) at the Reserve Bank of India’s (RBI) annual monetary policy statement 2013-14 on May 3.
“We are seeking some relief in the cash reserve ratio. We have asked for a 0.50 percentage points cut in CRR,” said SS Mundra, chairman, Bank of Baroda after a pre-policy consultation meeting of bankers with central bank officials.
CRR is the share of deposits that banks must set aside in cash with the central bank. A cut in CRR frees liquidity and help banks reduce lending rates.
Banks’ loans grew 12.1% year-on-year to March 22, lower than 16.6% in the previous year, provisional data from the RBI showed on Wednesday.
Deposits grew 10.8% in 2012-13, compared with 11% in the previous year. The RBI had projected credit and deposit growth at 16% and 15% respectively.
The central bank has cut CRR, which now stands at 4%, by 2 percentage points since January 2012 to ease tight liquidity in the banking system.
Further, the RBI has cut interest rates in the last two successive policy reviews by a total of 0.50 percentage points so far in 2013, but has cautioned about limited room for further easing as it is constrained by high inflation and current account deficit.
Banks did not pass on the reduction to borrowers as tight liquidity and sluggish deposit growth restrained them from easing lending rates.
Banks’ credit stood at Rs. 2.63 trillion as of March 22, while deposits stood at Rs. 67.51 trillion, according to RBI data.