State Bank of India Chairman Pratip Chaudhuri said he expected the Reserve Bank of India (RBI) to cut banks’ cash reserve ratio (CRR) 50 basis points (bps) in the first quarter monetary policy review on Tuesday.
Liquidity is tight, even as banks are borrowing less from RBI’s repo counter, and there is a need to address it, he said.
Bank borrowings from RBI’s liquidity adjustment facility (LAF) has reduced to within the central bank’s comfort range of one per cent of net demand and time liabilities since the past month.
He said, “LAF is not the only indicator of liquidity. Some banks are still picking up certificates of deposit at nine per cent that means liquidity is tight.” He said a reduction in the policy rate would be of lesser benefit to banks.
At present, the CRR is at 4.75 per cent. RBI had reduced it 50 bps in January and 25 bps in March. It had kept the CRR unchanged in the April and June policy announcements .
Chaudhuri said the pace of rise in bad loans had slowed in this financial year. “Deposit growth has been strong but loan growth is muted,” he said. SBI will announce the results for the first quarter on August 8.
Yesterday, SBI raised $1.25 billion for five years through dollar-denominated bonds at a coupon rate of 4.125 per cent, yielding 375 bps over US Treasury bills of the same tenure. The issue was subscribed 5.4 times the base size. The bank still has headroom to raise $4.5 billion via the same route.
“We aim to tap the international market at least once a year,” said Hemant Contractor, managing director and group executive-international banking.