Kamath disagrees with SBI chief on CRR

ICICI Bank Chairman says it is part of monetary policy and no issue can be made of it

ICICI Bank Chairman K V Kamath on Thursday disagreed with the suggestion of State Bank of India (SBI) chief Pratip Chaudhuri that RBI should scrap CRR, saying it is part of the monetary policy and no issue can be made of it.

Asked to comment on the vocal slugfest between Chaudhuri and the Reserve Bank of India (RBI) Deputy Governor K C Chakrabarty on the issue, Kamath said in the whole issue of monetary policy, several tools are being used, including Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR).

CRR is the portion of deposits kept by banks with the Reserve Bank on which no interest is paid. “I think the monetary authority (RBI) in its wisdom uses all these tools as appropriate and that’s what is being done. This (CRR) is nothing new. India always had a CRR for as long as I can remember and I don’t think honestly (there is) an issue to be made here,” he told reporters.

“You should look at it (CRR) as part of monetary policy that it is exercised and part of it is liquidity policy for the banks,” added Kamath, also non-executive chairman of Infosys Ltd. Earlier, he addressed the eighth India Innovation Summit, organised by the Confederation of Indian Industry (CII).

Last week, the SBI chief had made a strong pitch for the abolition of CRR, saying that keeping the funds with RBI without any interest was costing the banking system about Rs 21,000 crore.

He called for phasing out of CRR, saying it would allow banks to lower lending rates. If RBI can’t do away with it, it should at least pay some interest on CRR since banks pay their depositors, he had said. RBI’s Chakrabarty had this week frowned on Chaudhuri’s contention on phasing out CRR. “If the SBI chairman is not able to do business according to our regulatory environment, he has to find some other place,” he had said.