Published on Fri, Oct 10, 2008 at 11:32 | Source : CNBC-TV18
Updated at Fri, Oct 10, 2008 at 16:17
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CRR cut good but not enough, say bankers
Reacting to Reserve Bank of India’s announcement to cut the cash reserve ratio by 150 basis points this morning — the 150-point cut includes the 50-bps cut announced on October 11 — experts are of the view that the cut will help infuse liquidity into the cash-starved markets.
Reacting to Reserve Bank of India's announcement to cut the cash reserve ratio by 150 basis points this morning, experts said that the cut will help infuse liquidity into the cash-starved markets, but liquidity pressure would remain. The 150-bps cut includes the 50-bps cut announced on October 6.
Keki Mistry, Managing Director of HDFC, said, "The announcement should not surprise us. The liquidity in the system is very low and because of the liquidity situation, the RBI has cut the CRR." Keki that that whenever the CRR was increased earlier, the retail CRR would be increased too as the there was an inflow of the US dollar into the country. "Given the current outflow, the justification for high CRRs is not there any longer."
TS Narayanaswami, CMD, Bank of India, said given the pressure on liquidity, it is likely to stay. He added that the net impact of funds released by the CRR cut on the bank would be Rs 800 crore, but said the bank would like to stay liquid with the money than intensify business operations. Infusion of liquidity should be the RBI's main concern, Narayanaswami said.
SA Bhat, Chairman, Indian Overseas Bank, said that the CRR cut would give the bank Rs 1,300 crore of liquidity, even as he said some pressure on call money would still remain. Bhat said that clients putting off plans due to high interest rates. He added that a cut in interest rates looked difficult as of now.
Keki Mistry, Managing Director of HDFC, said, "The announcement should not surprise us. 
