In order to further ease liquidity conditions, bank treasury officials have asked the Reserve Bank of India to cut the cash reserve ratio, two bankers told NDTV Profit. The request was made during a meeting last week, the bankers said on condition of anonymity. Both bankers attended the meeting.
Bankers urged the central bank to cut CRR for further durable liquidity infusion, the first banker quoted above said.
Lenders have been requesting the RBI to cut CRR by another 50 basis points to 3.5%, the bankers said. On Dec. 6, the central bank had lowered the CRR by 50 bps to 4%.
Bankers say that despite recent cooling, call money rates remain elevated, necessitating a CRR cut.
Since January, the central bank has used various liquidity tools such as open market purchase of government securities, dollar-rupee buy/sell swap auctions and long-term variable repo rate auctions to ease liquidity conditions in the system.
However, a bounce back in rates last month has impacted credit growth, bankers said. On Wednesday, the weighted average overnight call rate was 6.28%, as against one-day call rate of 6.40% on March 18 and 6.55% on Jan. 1.
On March 30, banking system liquidity turned into surplus for the first time in three months to Rs 89,398 crore. On Tuesday, the RBI announced that it will conduct OMO purchases of government bonds worth Rs 80,000 crore in four tranches starting Thursday.
In a meeting on Thursday, RBI is likely to discuss revisions in the current liquidity management framework, the second banker said.
RBI has called for a meeting to take feedback on proposed revisions, such as allowing a fixed repo window for bank borrowing and shorter maturity variable rate repo auctions instead of long-term, officials said.
The RBI is trying to provide liquidity assurance and create credit expansion at a time when economic growth is slowing, according to the bankers.
Now there is a discussion that if the bank funding target has to be met then it should be provided on the policy rate as it increases certainty of liquidity at a time when there is ambiguity on deposit outflows due to rapid digitisation in India, such as 24x7 payment options.
The RBI's Monetary Policy Committee will meet on April 9 to announce its next policy statement.
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