SBI Expects RBI to Cut CRR Prior April 7

Posted By: Religare
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The Reserve Bank of India is expected to go for a cut in the CRR as a "prelude" to the monetary policy review meet scheduled to be held on April 7, according to an SBI report.

SBI Expects RBI to Cut CRR Prior April 7
A cut in the cash reserve ratio (CRR), the portion of deposits which the banks are required to have in cash with the central bank, would increase liquidity in the system.

The CRR was left unchanged at 4 per cent in the last policy review held on March 4.

"We believe a cut in CRR/daily CRR requirement at this juncture by the RBI may have a profound impact on transmission mechanism," the report said, adding that "we expect RBI to cut CRR as a prelude to April 7".

"However, a cut in the policy rate is still not translating as the commercial banks are yet to oblige through a cut in lending rates," the report said adding these cuts were still has not enough for banks to take call on cut in lending rates.

According to SBI Research, repo rate cut has only a signaling effect while CRR cut will increase system liquidity and bring down cost of funds for banks.

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