Union Budget 2012: RBS sees CRR, SLR cut soon, awaits GST launch by FM

RBS India today said it expects some concrete measures from the Reserve Bank to ease the tight liquidity situation in the system, which has nearly touched Rs 2 trillion in the recent days before the scheduled mid-quarter review on March 15.

"Yes, I expect some liquidity easing measures like a reduction in the cash reserve ratio (CRR) or a SLR (statutory liquidity ratio which is the mandatory holdings that banks have to keep in government bonds) as the advance tax payment will put more pressure on the system," RBS India chairperson and country executive Meera Sanyal told reporters on the sidelines of a function.

The last day for paying the last installment of advance tax is scheduled for March 15, and it is estimated that this will put an additional Rs 60,000 crore burden on the banking system. She further said, the liquidity situation is so tight that it could happen before March 15.

Recent days have seen banks drawing over Rs 1.8 trillion in overnight borrowings, much above the RBI's stated comfort zone of Rs 60,000 crore.

To tide over the concerns, the RBI has been buying back government bonds from the market and had also cut the CRR by 0.50% in its last policy announcement on January 24 releasing additional Rs 32,000 crore in the system. On January 24, the Reserve Bank had brought down the CRR by 50 basis points to 5.5%, releasing Rs 32,000 crore into the system daily. The move came as the monetary authority flet that inflation has peaked --- in January it had come down to 6.55%, after its relentless battle to rein in runaway inflation for 19 months till October last.

But growth too has take a bad beating in its wake with Q3 growth coming down to a three-year low of 6.1%. On the forthcoming Budget, Sanyal said he expects the Budget to focus on fiscal and tax reforms. The Budget is likely to announce a date for the much-awaited goods and services tax as also direct tax code.