To accelerate investment and drive growth in the economy, the country's largest public sector bank, State Bank of India's Chairman, Mr. Pratip Chaudhuri has urged Reserve Bank of India to slash cash reserve ratio and other key policy rates.
Talking on the matter, Mr. Chaudhuri said, "As RBI's monetary policy review is slated on January 29, we have already requested for a cut in cash reserve ratio by up to 100 basis points (1 per cent) and repo rate by 50 basis points (0.5 per cent)."
He also mentioned that he was thankful to the central bank for slashing the cash reserve ratio from 6 percent to 4.25 percent. Cash reserve ratio (CRR) is the amount of funds that banks have to keep with RBI. According to him, a reduction in interest rates in needed to deal with the inflationary conditions prevailing in the economy.
Adding that reduction in interest rates may help to increase investment, he said, "Inflation can be contained by boosting the manufacturing sector and raising supply for which high investment is required." He further added, "If inflation and stagnation are allowed to persist, it will create a grim situation of stagflation." Thus, decreasing interest rates will be helpful for uplifting the investment climate, he added.