CRR cut could soften interest rates: Bankers

CRR cut could soften interest rates: Bankers


Mumbai: With another round of cut in the mandatory cash deposit requirement by 100 basis points, bankers feel that the easing of the liquidity would translate into softening of interest rates.

“CRR cut of 1.5% which would release about Rs60,000 crore in the banking system that could results in softening of interest rates," Bank of Maharashtra Chairman and Managing Director Allen C A Pereira told PTI.

Both lending and deposit rates are likely to see some downward trends as the cost of fund would decline, he said.

Another 100 basis points cut comes barely four days after RBI announced CRR reduction by half a percentage point and followed the rate cut decision by number of central banks across the world including US Fed, European Central Bank and Bank of England.

“Accordingly, on a review of the evolving liquidity situation in the context of global and domestic developments it has been decided to reduce CRR by 150 basis points to 7.50% with effect from the fortnight beginning 11 October, 2008 instead of 50 basis points reduction announced on 6 October, 2008," RBI said in a statement here.

According to Punjab National Bank Executive Director J M Garg a rate cut cannot be ruled out. With the release of CRR amount, lending operations would ease to that extent.

For the time being major issue is liquidity, he said, adding, the benchmark rates could also be reduced in the days to come.