Fighting a tight liquidity situation amid a more-than-expected rise in credit demand and slowing deposit growth, bankers on Tuesday requested the Reserve Bank to cut mandatory reserve balances like cash reserve ratio and statutory liquidity ratio, even though they expect a 25 basis points spike in policy rates on January 25.
"The Reserve Bank will have to balance between growth and inflation," Indian Banks Association chief executive K Ramakrishnan told reporters after the customary pre-policy meet with the central bank in Mumbai.
He further said, bankers told RBI about their concern about the sluggish deposit growth. "We expect only around 17% deposit growth this fiscal against a 22-24% spike in credit demand," Ramakrishnan said. Despite many an increase in deposit rates, banks have been unable to attract money from the public for quite some time now.
Bankers who met, attended the customary pre-policy meet with the central bank included the heads of the State Bank, ICICI Bank, HDFC Bank, Bank of Baroda, Union Bank of India, and Allahabad Bank among others. However none of the leading bankers spoke to the media.
Amid a massive spike in food inflation in the recent weeks and slowing industrial growth, RBI is slated to unveil its third quarter credit policy on January 25. It is widely expected that against its last policy announcement of a pause in rate hikes, the central bank will yet again increase policy rates to batten down the wayward inflation.
In October and November, the six core sectors recorded poor growth rate. While in October they grew by a paltry 3.5%, in November it further dipped to 2.3%. Economists expect a deceleration in industrial production in the third quarter. In Q1 and Q2, GDP grew by a robust 8.9%.