CRR hike not to affect pvt sector's credit flow: Subbarao

Reserve Bank of India (RBI) Governor D Subbarao said the hike in the cash reserve ratio (CRR) announced today, would not affect credit availability to the private sector and harden interest rates immediately.

"(Despite the CRR hike), there will be sufficient liquidity in the system to meet the potential demand from the private sector," Subbarao told reporters here today.

Subbarao, who met bank chiefs earlier in the day to discuss the policy measures, said banks informed him that the hike in CRR would not put an immediate pressure on them to up lending rates.

Banks also said that loan-growth prospects in the system remain favourable but expressed concern that bad loans could increase going forward, particularly from the restructured assets.

Subbarao said the lenders also expressed concern over their growing exposure to the infrastructure sector and wanted Government intervention to address the asset-liability mismatch.

To tackle spiralling inflation, RBI today hiked the CRR, amount banks have to park with RBI, by 0.75 per cent to 5.75 per cent but left the repo and reverse repo rates unchanged.