Expect 100 bps rate cut in 2-3 tranches: Bank of India

N Seshadri, ED, Bank of India, says that the current liquidity situation is slightly tighter than RBI's comfort level. He also says that there is not much credit pick up and whatever credit pick up is available withers away. Today, there is liquidity available with the banks due to excess SLR. But, we need to look into the overall liquidity vis-à-vis growth of 15-20%.

Below is the edited transcript of his interview. Also watch the accompanying video. Q: Has the banking sectors asked RBI for CRR cut? Do you share the same view?
A: The current liquidity situation is slightly tighter than RBI's comfort level. We are seeing certainly amount of liquidity constraint. The growth in credit has not been very large. But, again the mop up of advance tax plus some credit growth, which if it happens, then liquidity will be affected.
The RBI has legroom in releasing liquidity with a CRR cut and I am sure that the RBI will do argument with that liquidity constraint. But, there is evidence of liquidity issues which the RBI will look at. Q: Prominent bankers are speaking about a 100 bps cut in CRR. Do you think 100 bps is can happen even if it were a wish list?
A: No, it might happen over a period of maybe two-three cuts. Ultimately, every 25 bps release about Rs 15,000 crore and currently we are talking about almost Rs 30,000-0,000 crore of liquidity which is above the RBI concern.   Q: How much liquidity is expected? Is it Rs 85,000 crore? That is the money that went from the RBI to the banks in today's repo?
A: Correct. Q: NDTL of 1% is close to Rs 70,000 crore. We are not higher than the average. In an advance tax payout week this would be in line with expectation and plus Rs 12,000 crore coming from OMO?
A: I wish to highlight that there is not much credit pick up and whatever credit pick up is available withers away. Today, there is liquidity available with the banks due to excess SLR. But, we need to look into the overall liquidity vis-à-vis growth of 15-20%. Q: So, you expect a CRR cut?
A: Definitely, there is a case for a reduction in CRR. Q: What is the directive coming from the MoF with regards to restructuring of loans given to electricity distribution companies? What is your input?
A: No, I am unaware what actually has transpired in meeting. While some discussions had happened in an attempting to get discoms as a whole. Nothing has materialised in terms of MoU. Q: If there is a 50 bps CRR cut, how much do you think the banks will be able to pass on?
A: CRR cut in fact not transmit into a reduction in the rate. It is basically bringing liquidity. Repo rate cut will result in transmission.