Leading bankers today asked the Reserve Bank of India (RBI) not to squeeze money supply through policy instruments in the forthcoming monetary policy review and sought reduction in the deposit rates for savings accounts.
In their pre-monetary policy meeting with the apex bank, the bankers informed the RBI that they may not be able to achieve the targeted 18 per cent loan growth for the current fiscal and demanded relaxed norms for infrastructure lending.
Demanding status quo on the rates front, the bankers pointed out that the current surplus liquidity in the system is slowly drying up on the back of rising credit offtake and said that the liquidity situation does not demand a hike in the CRR or key policy rates in the immediate future.
The banking watchdog will announce the fourth quarter monetary policy on January 29. And it is widely expected that the central bank will hike CRR and revise the key policy rates in order to fight galloping inflation and economic recovery.
The bankers also asked the apex bank to lower the interest rates being paid to customers on the savings deposits in the backdrop of April 2010 deadline to implement the RBI directive requiring them to calculate savings a/c rates on a daily basis.
"Bankers feel that this would considerably increase their cost of funds. They either want the interest rates (on savings deposits) to be lowered or the status-quo to continue," Indian Banks Association chief executive officer K Ramakrishnan told PTI after the meeting.
Bankers, who met the four Deputy Governors of the RBI include SBI Chairman O P Bhatt, ICICI Bank MD & CEO Chanda Kochhar, Union Bank CMD MV Nair, Bank of Baroda chairman and managing director MD Mallya, and StanChart country head Neeraj Swaroop among others.
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At present, the banks calculate savings a/c rates from the 10th to the last day of the month, which results in their interest costs below 3.5 per cent. However, this norm is applicable only to savings deposits under Rs 2 lakh, above which the banks are free to offer any rates.
Given the slow credit offtake in the industry, bankers also told the apex bank that the set credit target of 18 per cent for this fiscal may not be achievable, though a slight pick-up in the credit offtake is visible.
"Banks feel that the 18 per cent target may not be achieved in FY10 and the credit growth, on an average, for the full fiscal may be around 15 per cent," Ramakrishnan said.
The bankers also wanted relaxation in the infrastructure lending norms from the central bank including permitting them to issue tax-free bonds with exemption from CRR and SLR requirements.
CRR or cash reserve ratio is the amount of money banks have to keep with the RBI, while the SLR or the statutory liquidity ratio or the liquid assets that banks keep with themselves to maintain sufficient cash balance. The normal SLR is 25 per cent of the overall assets of a bank) requirements.
A reduction on any of these norms will help the banks raise medium-term funds. The bankers also discussed the 70 per cent loan loss coverage ratio requirement by September. Banks asked for further easing of the the norms pertaining to this.