CRR
Banks request RBI to not raise CRR in next monetary policy meet
Mumbai: Banks have approached the Reserve Bank of India (RBI), requesting not to further increase the Cash Reserve Ratio (CRR) threshold in the upcoming monetary policy meeting to allow credit growth amid already tightened liquidity following the last monetary policy in early May.
Last week, Indian Banks Association (IBA) made the request on behalf of the banks after excess liquidity plummeted to Rs 3.5 lakh crore, ET reported.
In an off cycle on May 4, RBI had increased the CRR by 50 basis points to 4.5 percent, which sucked out Rs 90,000 crore out of the system. It had also increased the repo rate by 40 basis points to 4.4 percent.
If CRR is increased further it would create a liquidity deficit which is less than central bank's calculation of neutral liquidity condition that is +/- 2% of the net demand and time liabilities and equals to Rs 3 lakh crore, said the source, the report said.
The request to not increase CRR threshold also partly arises from the fact that the central bank does not pay any interest on the money parked as CRR balances, the report said.
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