SBI chief wants RBI to pay interest on CRR

Arundhati Bhattacharya says the regulator should seek House nod for such a relief

State Bank of India Chairman Arundhati Bhattacharya on Wednesday asked that the Reserve Bank of India (RBI) seek a parliamentary nod to pay interest on the incremental cash reserve ratio (CRR) for the fortnight in which all lenders were asked to park excess funds with the central bank.
 
While hailing the move to withdraw the incremental CRR, she said RBI should actively consider the idea to compensate banks for the yeoman service in making the demonetisation drive a huge success.
 
CRR is the mandatory amount that banks have to park with RBI but there is no interest on that amount.

 

On November 26, RBI had announced an incremental CRR of 100 per cent of the increase in net demand and time liabilities (NDTL) of scheduled banks between September 16 and November 11 effective the fortnight beginning November 26. This worked out to be around Rs 3 lakh crore.
 
RBI said the move was intended to absorb a part of the large increase in liquidity in the system following the withdrawal of old high-value Rs 500 and Rs 1,000 notes.
 
Though the measure was temporary, it put an additional burden on the banks, as around Rs 3 lakh crore of the fresh deposits went to RBI and for which there was no payment.

 
At the bi-monthly monetary policy review on Wednesday, RBI withdrew the incremental CRR effective December 10. The move came after the Centre last week allowed issuance of Rs 6 lakh crore worth of a market stabilisation fund by additional issuance of government bonds.
 
“We are very relieved that this additional burden (incremental CRR) that had come on to us is now been taken away. I wish something could be done for the fortnight past when that burden continued but I don't think we have got any relief from that,” Bhattacharya told CNBC-TV18 news channel.
 
For instance for paying interest on CRR, the central bank has repeatedly said it cannot be given and it is not allowed by Parliament, she said.

 
“Parliament can also be approached for this particular amount of CRR, if the central bank wishes to give us something for it. I don't really know whether they would, but this is something that would definitely be considered, given the fact that the banks have really played a yeoman service in getting this entire demonetisation exercise through and there has been a lot of expenses that we banks have had to incur.” Bhattacharya said a little relaxed view on the issue would be something that the banking sector would immensely appreciate.