Bankers meet to take up credit slowdown

A sharp fall in credit growth amid rising interest rates would be the key discussion point when chiefs of some commercial banks meet the Reserve Bank of India (RBI) this week ahead of the July 25 first quarter review of the 2006-07 annual monetary policy.

The bank chiefs under the banner of Indian Banks' Association (IBA) will meet RBI Deputy Governor Rakesh Mohan. "One of the major points of discussion is the impact of higher interest rates on the credit pick-up," said a banker.

Bankers feel companies are shying away from availing of loans from banks and also from bond markets for raising resources owing to rising interest rates.

Bank chiefs are also expected to pitch hard for a cut in cash reserve ratio (CRR) from the current 5 per cent, as the Banking Regulation Act has been amended to do away with the practice of paying 3 per cent interest on banks' CRR balances with the RBI.

"This is expected to become a contentious issue," another banking said. Bankers said the RBI should either bring down the CRR for infusing some liquidity or restore the practice of paying some interest at least for some time now, as the banks are currently going through "trying times."