The Chairman of State Bank of India, India's largest public sector bank, has said that Cash reserve ratio (CRR) itself is a "waste" for Indian economy. He also said that the reduction in interest rates, introduced by Reserve Bank of India, has not helped to control inflation.
He disclosed the half yearly credit policy review, which has a 0.25 percent reduction in CRR and said, "Of course, I am an incurable optimist and I had expected a 50 basis points CRR cut. I still hold that CRR is a waste for the economy. But anyway it (CRR) has been cut by 25 basis points and governor had his own reasons and his own compulsions to see the inflation down."
It is reported that this is not the first time Chaudhuri has had a disagreement with the apex bank on the matter of cash reserve ratio. Last quarter, in August, he had suggested RBI to do away with CRR requirement for the benefit of the economy. On this, RBI Deputy Governor, K. C. Chakrabarty had lashed out at him saying, "If the SBI Chairman is not able to do business as per our regulatory environment, he has to find some other place."
The SBI Chief further added that the attempt made by RBI to contain inflation has not had the desired effect on the economy. On the matter, he said, "But I do not think that the 10 rate increases that happened have not helped in lowering the inflation because today's inflation is largely cost push. It is not so much of demand pull. So, to try to address that the rate of interest as an instrument may not be very effective."