Credit Policy: CRR may not be cut

With improvement in liquidity position in the system, bankers say they do not expect Reserve Bank of India to cut the cash reserve ratio in the lean season Credit Policy to be announced on Tuesday.

Executive director of United Bank of India Sunanda Lahiri said of late liquidity in the system has improved to such an extent that it is unlikely the RBI would reduce CRR from the present level of five per cent of net time and demand liabilities.

S K Chakrabarti, GM (treasury) of Allahabad Bank echoed similar views and said in the first fortnight of April, the liquidity position had improved due to increased FII inflows into the system.

Chakrabarti said that it is also likely that the RBI is going to tinker with the reverse repo rate given the present liquidity scenario.

According to him, this is particularly so because inflation was under control.

Lahiri said RBI is also expected to give a broad direction to the monetary policy about how the market would move in the coming days.

However, she said given the rise in spending propensity, it is expected that the apex bank would signal the movement of interest rates in line with other countries.

Since interest rates had been moving up worldwide, Lahiri said the bank rate might go up by 50 basis points, which would push up interest rates across the board and it is expected that RBI would give clear signals in this regard.

Chakrabarti said that there were chances that RBI might announce a modest hike in NRE and FCNR rates.

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