TT Epaper
The Telegraph
TT Photogallery
 
IN TODAY'S PAPER
WEEKLY FEATURES
CITIES AND REGIONS
ARCHIVES
Since 1st March, 1999
 
THE TELEGRAPH
 
 
CIMA Gallary

Bankers step up demand for rate cut

Ramakrishnan: Hopeful

Mumbai, Jan. 15: Bankers today urged the Reserve Bank to bring down both the repo rate and the cash reserve ratio (CRR) in its upcoming monetary policy review.

At the customary pre-policy meeting with the central bank today, the lenders sought a 50-basis-point reduction in the repo rate and at least a quarter-of-a-percentage-point cut in the CRR.

The repo rate is that at which the RBI provides liquidity to banks, while the CRR is the portion of deposits that must be maintained with the apex bank.

At present, the repo rate stands at 8 per cent and the CRR at 4.25 per cent.

The RBI has so far been impervious to the call for rate cuts by both the government and industry because of high inflation. However, in October, it indicated that rates could be reduced in the first quarter of this year before admitting in December that its policy focus had shifted to growth.

Recent developments have also bolstered rate-cut hopes. Industrial output in November shrunk to a four-month low of 0.1 per cent, while headline inflation fell to lower-than-expected 7.18 per cent in December.

K. Ramakrishnan, chief executive of the Indian Banks’ Association, today said a reduction in both the CRR and the repo would not only lead to the effective transmission of the central bank’s monetary policy intentions, but also send a strong signal to the market.

He added that the meeting saw bankers voicing their concern over the sluggish deposit growth.

Recent data show that bank deposit growth stood at 11 per cent, lower than 15 per cent forecast by the RBI for this year.

Bankers point out that the poor accretion in deposits was one of the main reasons that led to the tight liquidity situation. Pratip Chaudhuri, chairman of the State Bank of India, has demanded that banks be allowed to charge an interest rate on current account deposits to make them more attractive.

 
 
" "