The Hindu : National : Industry expects further hardening of interest rates

Online edition of India's National Newspaper
Monday, Apr 03, 2006

National

National

Industry expects further hardening of interest rates

Special Correspondent

FICCI survey says many want CRR cut by 50 basis points

NEW DELHI : Industry expects a further hardening of interest rates in the quarterly review of the monetary and credit policy of the Reserve Bank of India on April 18. At the same time, a majority of them hope that the RBI would reduce the cash reserve ratio (CRR) by 50 basis points from the current level of 5 per cent.

In a survey carried out by the Federation of Indian Chambers of Commerce and Industry, 82 per cent of the respondent bankers, financial institution representatives, corporates and other stakeholders see a further hardening of interest.

In addition, 79 per cent hope that the RBI would reduce the CRR which is the requirement for commercial banks to keep with the RBI in cash.

With the credit deposit ratio reaching 100 per cent, banks are facing tight liquidity situation. To ease this situation, the bulk of the respondents wanted the RBI to reduce the CRR in the quarterly review of the policy. Of those who expected further hardening of interest rates, 67 per cent expect it within the timeframe of three months, while the remaining foresee it in six months. Finance Minister P. Chidambaram had recently said that interest rates would remain attractive for depositors and borrowers.

Besides the CRR cut, banks also wanted the RBI to allow them to utilise excess statutory liquidity ratio for improving liquidity situation in the system.

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