For Quick Alerts
For Daily Alerts

CRR, SLR to come down gradually, says Subbarao


CRR, SLR to come down gradually, says Subbarao
Reserve Bank of India (RBI) plans to cut Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) soon so as to increase money supply in the market.

“There is need to bring down the Cash Reserve Ratio and Statutory Liquidity Ratio in a calibrated manner so that banks will have more money to lend as credit," RBI Governor, Subbarao said at the National Finance Symposium organized by the Indian Institute of Foreign Trade. .

Cash reserve Ratio (CRR) is the amount of Cash that the banks have to keep with RBI. Apart from keeping a portion of deposits with the RBI as cash, banks are also required to maintain a minimum percentage of their net demand and time liabilities with them at the end of every business day in terms of SLR. At present, CRR rate is 6% and SLR is 24%.

Banks aren't able to lend more due to tight liquidity as key policy rates are already on peak. Cutting down the reserve ratios will enhance money supply in the banking system. The move is to bring in Basel III rules by April 2013, after which all Indian banks would need to set aside additional capital.

Besides this, the RBI is also planning to launch Inflation indexed bonds, the floating rate bonds linked to the inflation rate which would help investors to protect themselves from any volatility in the movement of yields in the government bonds market. It will also help the government borrowing programme to be smoother. “We intend to launch these bonds shortly," Subbarao said.

He also added, RBI will also open up on the capital account side to allow free flow of money into and out of the country.

“Progressing to full capital account convertibility will help us access the foreign savings, and the government will be forced to be financially disciplined but the other side is that the economy will be exposed to vulnerable inflow and outflow of capital," the governor added.

Read more about: rbi inflation slr crr interest rate
Story first published: Wednesday, September 7, 2011, 13:48 [IST]
Company Search
Get Instant News Updates
Notification Settings X
Time Settings
Clear Notification X
Do you want to clear all the notifications from your inbox?
Settings X