Banking and monetary regulator Reserve Bank of India recently announced a dip in cash reserve ratio (CRR) in the monetary policy review. The CRR saw a slash by as much as 75 bps thereby coming as a big booster for banks.
With demand in credit likely to see a rise, coupled with advance tax payments by companies starting from this week, liquidity of banks would be under pressure. The reduction in CRR has thus come as a reliever.
Chairman of Indian Banks' Association, Mr M D Mallya said that the slashing of CRR has come as a positive initiative from the central bank which will definitely offer cushion in terms of liquidity.
"The CRR cut is a proactive step by the RBI to inject permanent liquidity into the system. This is expected to bring down the high level of overnight borrowings by banks from RBI. This would also ensure continued smooth flow of credit in the corporate and retail sector," Ms Chanda Kochhar, Managing Director and CEO, ICICI Bank.
According to CMD of Indian Bank, Mr T M Bhasin, "The injection of funds into the system will reduce the cost of borrowing for banks. The reduced cost of borrowing would add to our bottomline."
"Looking at the liquidity position for the past weeks, the reduction in CRR has come at the right time," said Mr M. Bhagavantha Rao, Managing Director, State Bank of Hyderabad.