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'RBI may not cut CRR further'

The Reserve Bank may not cut CRR, mandatory deposit requirement for banks, further in the immediate future and may opt for other instruments to infuse liquidity into the system.

business Updated: Oct 17, 2008 13:50 IST

The Reserve Bank may not cut CRR, mandatory deposit requirement for banks, further in the immediate future and may opt for other instruments to infuse liquidity into the system, a finance ministry official said on Friday.

"CRR was nine per cent. There was a headroom to cut it. But we cannot go on cutting CRR indefinitely," the official said.

He also said that the current liquidity situation is enough.

The Reserve Bank has cut Cash Reserve Ratio (CRR) by 2.5 percentage points to bring it down to 6.5 per cent from nine per cent to infuse Rs one lakh crore into the cash-strapped system.

Besides, the central bank is also giving Rs 25,000 crore to banks and others as the first instalment against their outgo on farm debt waiver scheme.

RBI has also opened a special window of Rs 20,000 crore for mutual funds, of which over Rs 5,000 crore has been availed of till Thursday.

The central bank is scheduled to come out with its mid-term monetary policy on October 24 and is widely expected to take some more steps to infuse liquidity.

The official said public sector banks are unlikely to come out with follow-on public offers due to bearish market conditions, but can raise funds through tier-II debts like subordinated bonds and convertible bonds.

There is headroom for PSU banks to raise Rs 77,000 crore this way, he said.