MUMBAI: The Reserve Bank of India (RBI) on Friday increased the Cash Reserve Ratio (CRR) from 5 per cent to 5.25 per cent from December 23 and from 5.25 per cent to 5.50 per cent from January 6, 2007. This will result in absorbing Rs. 13,500 crore of resources from the banking system.

"It has been decided to increase the CRR of scheduled commercial banks, regional rural banks (RRBs), scheduled State cooperative banks and scheduled primary (urban) co-operative banking system by one-half of one percentage point of their net demand and time liabilities (NDTL) in two stages, effective from fortnights beginning: December 23 at 5.25 per cent and January 6, 2007, at 5.50 per cent.

"As a result of the above increases in CRR on liabilities to the banking system, an amount of about Rs. 13,500 crore of resources of banks would be absorbed," the RBI stated.

Recalling the Mid-Term Review of Annual Policy Statement for 2006-07 on October 31, the RBI stated: "Containing inflation expectations in the current environment and consolidating gains achieved so far in regard to stability would warrant appropriate, immediate measures and willingness to take recourse to all possible measures in response to evolving circumstances promptly."

The RBI stated the reasons for increasing the CRR, including high real GDP growth rates, 30.1 per cent year-on-year increase in non-food bank credit up to November 24, 2006, on top of an increase of 31.1 per cent a year ago, expansion in reserve money and year-on-year WPI inflation from 4.1 per cent at end-March 2006, to 5.3 per cent as on November 25, 2006 higher than 4.5 per cent a year ago.

"The external sector continues to be strong and current account deficit is likely to be close to the trend, and will continue to be accommodated by net capital flows. However, it is necessary to recognize the challenges emanating from capital flows and consequent impact on increasing liquidity. In view of these factor, it has been decided to increase CRR,'' the RBI added.

However, the RBI had stated in its last review on October 31 that there was no reason to change the CRR then.

PTI reports

SBI raises deposit rates

State Bank of India (SBI) on Friday revised upwards the interest rates on its domestic term deposits with effect from December 1.

For tenures of one year to less than three years, three to less than five years and five years and above, the rate has been hiked by the bank by 75 basis points to 7.5 per cent, 7.75 per cent and 8 per cent, respectively.

For senior citizens, the revised rates will be 8 per cent, 8.25 per cent and 8.50 per cent respectively, the bank informed the Bombay Stock Exchange (BSE) here.

For lesser tenures, the rates have been hiked by 25 basis points.

The interest rate payable to SBI staff and its pensioners will be one percentage point above the applicable rates.

The rate applicable to SBI pensioners of 60 years and above will be one percentage point above the rate payable to senior citizens, subject to a ceiling of 9 per cent per annum, the bank stated.

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