Banks Seek Partial Easing Of Crr, Slr Norms

Banks are lobbying with the RB) for partially relaxing the CRR and SLR requirements on certain liabilities.For quite some time now, banks have been urging that the reserve requirements on inter-bank deposits be abolished.

This, they point out, would help in the development of the inter-bank term money market. However, with this demand not currying favour with the RBI, the banks are now asking for a partial relaxation. They want the resources raised for funding infrastructure projects to be exempted from CRR and SLR stipulations. They also want the deposits that the regional rural banks (RRBs) keep with them as part their reserve needs to be treated similarly.

Contrary to initial expectations, the Union budget did not have major recommendations for the core sectors. Many suggestions made by the Rakesh Mohan panel have not been implemented by the central government. Bankers are hoping that the forthcoming credit policy would have measures that would facilitate their entry into infrastructure project financing in a big way. Sources said banks will be able to raise long-term funds for core projects. But the basic impediments are the CRR and SLR stipulations on these funds. Not only do the reserve requirements partially reduce the quantum of funds available, there is also an increase in the cost of funds.

The other demand of the banks is on account of the RRBs. The RRBs maintain their reserve needs with sponsor banks in the form of deposits. Being the sponsor, commercial banks cannot refuse these deposits. According to a source, the sponsor banks have to pay the RRB 13.5 per cent on this. The sponsor banks are required to maintain the reserve requirements on these deposit and this they feel is unreasonable.