Reserve Bank of India (RBI) Deputy Governor K C Chakrabarty on Tuesday hinted the central bank might not hike the cash reserve ratio (CRR), as such an increase would pose “extreme difficulties” for banks.
Persistent tight liquidity since telecommunications companies paid nearly Rs 1 lakh crore for spectrum allocation has prevented RBI from raising the cash reserve ratio so far, Chakrabarty said.
Banks have been net borrowers of Rs 20,000-30,000 crore from RBI’s daily liquidity adjustment facility tender since the last two months.
Chakrabarty also pointed out that banks’ deposit growth is not picking up. According to latest RBI data, banks’ deposits grew 14.93 per cent year-on-year in the fortnight ended July 2.
However, Chakrabarty refrained from commenting on the extent of rate hikes RBI may affect in its policy review on July 27. Most market participants expect RBI to hike reverse repo and repo rates by at least 25 basis points and leave CRR unchanged. The reverse repo rate currently stands at four per cent, while the repo rate is 5.5 per cent.
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