BackSBI chief calls for phasing out CRR
SBI chairman Pratip Chaudhuri says phasing out CRR will lead to overall growth in the economy
Premium(Indranil Bhoumick/Mint )
Kolkata: State-owned State Bank of India (SBI), the country’s largest lender, wants the Reserve Bank of India (RBI) to phase out the system of banks having to park a portion of their deposits with it in the form of cash reserve ratio (CRR).
SBI chairman Pratip Chaudhuri said on Thursday that CRR “is unfairly put on the bank" and phasing it out would lead to overall growth in the economy.
CRR, a monetary tool that RBI uses to suck out liquidity from the financial system when inflation is high, is currently pegged at 4.75%.
Since RBI does not pay interest on the money that banks need to keep with it they are forced to charge higher rates from borrowers to make up for the loss, Chaudhuri said.
Abolishing CRR will reduce interest rates for borrowers, he said, adding that phasing it out is unlikely to trigger a rise in prices as the country’s inflation woes are driven by the inadequate supply of commodities and inputs.
The finance ministry and many banks have asked RBI to phase out CRR, Chaudhuri said.
Bhaskar Sen, chairman and managing director of United Bank of India, however, said the banking system has got accustomed to CRR and it has proven to be an “effective monetary tool for regulating the economy".
“I don’t see any logic in phasing out CRR as the economy already has excess liquidity at this point," Sen said. However, banks would be happy to receive “some incentive" for parking CRR funds, he said.
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