State Bank of India Chairman Pratip Chaudhuri again made a strong pitch for a reduction in banks' Cash Reserve Ratio (CRR) at the Reserve Bank's mid-quarter review of monetary policy scheduled September 7.
"I would like to be optimistic. I expect a one per cent cut in CRR," he said, when asked about his expectation, at the sidelines of the Ficci-IBA banking seminar. "It is likely that a cut in CRR will bring changes in the base rate (BR)." The BR is the benchmark lending rate to which all loan rates are linked.
Chaudhuri said a one per cent cut in CRR would release Rs 10,000 crore for SBI. This could be deployed and earn the bank at least Rs 800 crore. The benefit could be passed on to borrowers by lowering the BR.
The SBI chief said the effect of a cut in the policy rate or the repo rate would be minimal for banks. Such a move would not help banks to reduce lending rates. RBI reduced the CRR twice at the beginning of the year, by a total of 125 basis points (bps).
It had also reduced the Statutory Liquidity Ratio by 100 bps, to 23 per cent of banks' net demand and time liabilities. SLR is the proportion of total deposits that a bank must maintain in the form of cash and other
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