Ninety banks have benefited from the decision by the Reserve Bank of India to exempt inter-bank liabilities (IBL) from the cash reserve ratio (CRR) equirements.
The other nine banks have benefitted only partially from the exemptions.
The withdrawal of the 10 per cent cash reserve ratio on inter-bank liabilities coupled with the introduction of the general refinance facility will augment thebankingsector's liquidityto the extentof Rs 5,550 crore.
These figures were reeled out by C Rangarajan, governor, Reserve Bank of India , to substantiate his argument that the monetary policy has helped in increasing the credit situation and bring about a reduction in the interest rates.
Rangarajan was delivering the 17th B F Madon Memorial Lecture on The Current Economic Trends and Monetary Policy.
Rangarajan said that apart from infusing liquidity in the system, the withdrawal of the cash reserve ratio on inter-bank liabilities will help promote the term money market and facilitatethe development of a realistic yield curve.
In addition, the governor also clarified the issues regarding to maintaining the cash reserve ratio and statutory liquidity ratio on inter-bank liabilites.
While the Reserve Bank of India Act, 1934, specifies that banks have to maintain a minimum cash reserve ratio of three per cent on their total demand and time liabilities including the liabilities subject to zero cash reserve ratio, as per the Banking Regulation Act, 1949, they will have to maintain a minimum statutory liquidity ratio of 25 per cent on such liabilities.
Another stated objective of the central bank has been to bring about an improvement in the functioning of the various markets -- the money market, the government securities market and the forex market.
The basic objective of the measures taken as part of the credit policy is to widen and deepen the foreign exchange markets and integrate them with the other markets.
The move is expected to lead to a unified financialsystem and achievement of higherlevelof efficiency in resource allocation in economy.
