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RBI slashes crr, banks get more to lend

business Updated: Jan 25, 2012 01:08 IST
HT Correspondent
HT Correspondent
Hindustan Times
cash reserve ratio


The Reserve Bank of India on Tuesday slashed the proportion of deposits banks have to park with the central bank - the cash-reserve ratio - adding R32,000 crore to the banks' pool of lending resources.

The RBI, however, lowered its 2011-12 growth projection to 7% from 7.6%. The CRR cut - by 0.50 percentage points to 5.5% - may nudge the banks to reduce interest rates on loans to individual and corporate borrowers. Finance minister Pranab Mukherjee said, "Banks will have more money to lend and liquidity will increase."

But if you are a home loan borrower, do not expect your EMIs to come down. For, the banks are not likely to offer lower rates to their existing customers.

What’s more, with more funds to play with, the banks may not need to offer higher rates on deposits to woo customers.

"We do expect the lending rates to come down, but I cannot speak on behalf of the banks," RBI governor D Subbarao said after unveiling the third quarter monetary policy review on Tuesday.

"Perhaps there could be some softening of lending rates in some select pockets," said Pratip Chaudhuri, chairman, State Bank of India.
The central bank, however, kept the repo rate — at which banks borrow from the RBI — unchanged at 8.5%.

It raised the repo rate 13 times since March 2010 to tame inflation.

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