RBI Monetary policy: Loans likely to become cheaper by 30 basis points

RBI move to exempt banks from maintaining CRR may free up to Rs 2 trn for lending to retail and MSME segments, says ICRA

Banks will have the incentive to give loans of almost Rs 2 trillion and cut interest rates by up to 30 basis points (bps) because of micro, small and medium enterprises coming out of the purview of the cash reserve ratio (CRR).

Lenders said the move would make banks focus more on retail and SME segments at a time when demand from corporate and infrastructure is tepid. These measures are also expected to propel banks to put in extra efforts to fill in the space vacated by finance companies and housing finance firms facing liquidity challenge.

The Reserve Bank of