Rate cut won't help, banks have enough funds: PMEAC | business | Hindustan Times
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Rate cut won't help, banks have enough funds: PMEAC

business Updated: Mar 04, 2009 19:51 IST

Country's top think tank PMEAC on Wednesday said any decision to reduce policy rates by the Reserve Bank will not help the industry as banks have enough funds.

"Banks are flush with liquidity... In this kind of situation, reducing the rate by RBI won't help much," Prime Minister's Economic Advisory Council (PMEAC) chairman Suresh Tendulkar told PTI.

The banks, he said, are holding government securities up to 31 per cent of their deposits, as against 24 per cent mandated by the Reserve Bank.

Since mid-September, RBI has gradually reduced key policy ratios and rates to inject about Rs 4,00,000 crore into the system.

RBI, however, refrained from making any changes in key rates in the third quarterly review of its monetary policy unveiled on January 27.

With inflation rate sliding to about a 15-month low of 3.36 per cent for the week ended February 14, clamour for further reduction in key policy rates has begun to fuel the economy reeling under the impact of the global financial meltdown.

The measures taken by RBI and stimulus packages announced by the government have, however, failed to have the desired impact on the economy, which registered a growth of 5.3 per cent in the third quarter (October-December 2008), down from 8.9 per cent in the corresponding period last year.