CRR hike won't affect interest rates or credit flow: Subbarao | business | Hindustan Times
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CRR hike won't affect interest rates or credit flow: Subbarao

business Updated: Jan 29, 2010 20:38 IST

The Reserve Bank on Friday said its decision to hike Cash Reserve Ratio will not harden interest rates immediately or impact the credit flow to the private sector.

In its quarterly monetary policy review today, RBI hiked the Cash Reserve Ratio (CRR)-- the amount banks have to park with the central bank-- by 0.75 percentage points to 5.75 per cent.

"(Despite the CRR hike), there will be sufficient liquidity in the system to meet the potential demand from the private sector," RBI Governor Subbarao told reporters in Mumbai on Friday.

RBI has left the short-term lending and borrowing rates unchanged at 3.25 per cent and 4.75 per cent respectively.

Subbarao, who met bank chiefs earlier in the day to discuss the policy measures, said banks have informed him that the hike in CRR would not put an immediate pressure on them to up the lending rates.

Banks also said that loan growth prospects in the system remain favourable but expressed concern that bad loans could increase going forward, particularly from the restructured assets.

Subbarao said the lenders also expressed concern over their growing exposure to the infrastructure sector and wanted government intervention to address the asset-liability mismatch.