SBI chairman says CRR cut unlikely in RBI review

By Swati Pandey
REUTERS - The Reserve Bank of India is unlikely to cut banks' cash reserve ratio at its January 24 policy review, Pratip Chaudhuri, chairman of State Bank of India, the country's largest lender, said on Tuesday.
Chaudhuri also said it would be difficult for banks to lower deposit rates in the current environment of high interest rates.
"CRR cut is unlikely - that is my personal view. But, we have asked them to pay interest on it," Pratip Chaudhuri told Reuters over the telephone.
The RBI has kept the CRR -- the proportion of deposits banks keep in cash with RBI -- unchanged at 6 percent even as it increased its policy rate 13 times to 8.5 percent, its highest since July 2008, since March 2010.
On Tuesday, select bankers, including Chaudhuri, met RBI Deputy Governor Subir Gokarn, in charge of monetary policy review.
The customary meeting was to discuss macro-economic factors, including credit and deposit growth, interest rates, inflation, and economic growth.
Lenders, worried over the slow pace of credit growth, asked the RBI to lower its policy rate and the CRR, said K. Ramakrishnan, chief executive of Indian Banks' Association.
Indian banks' loans grew 17 percent in the year to December 16 compared with nearly 24 percent in the same period a year ago, according to RBI's latest weekly data.
The RBI has forecast a credit growth of 18 percent for the current financial year ending March 2012.
"Indications at this point of time are that credit growth will be 16 percent for the current financial year," Ramakrishnan said.
"Bankers want CRR cut and policy rate cut to send out a signal that it is time to think about growth," he added.
India's economy is slowing on a combination of feeble growth in the United States and Europe, a ratcheting up of interest rates to quash high inflation and a decision-making paralysis in the government.
Growth at 6.9 percent in the quarter ending September was the weakest in over two years, forcing the government to pare the forecast for the current fiscal year to about 7.5 percent from 9 percent made in last year's budget.
Prime Minister Manmohan Singh on Sunday further reduced the projection to 7 percent and hoped the economy would withstand an uncertain external environment.
Slower growth has raised concerns over banks' asset quality with an increase in the number of cases being referred for debt restructuring, M.D. Mallya, chairman and managing director of Bank of Baroda told reporters after the meeting.
"Stress on the asset quality is one of the main concerns that we need to look at. We are trying to see that credit monitoring mechanism is strengthened substantially," said Mallya, who is also the chairman of IBA.
Bad and restructured loans at Indian banks are likely to double to over 10 percent of total loans in the next 12-18 months from 5 percent at March 2011, Morgan Stanley said in a research note on Monday.
(Editing by Rajesh Pandathil)