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Finance Minister P Chidambaram today said the Reserve Bank of India (RBI) would address the concerns related to a tight liquidity situation in its credit policy review tomorrow.
“I am sure he (RBI Governor D Subarao) will address the issue of liquidity and there will be a paragraph on liquidity in the policy,” Chidambaram said after a meeting with heads of public sector banks today.
Banks borrowed Rs 1,42,000 crore through the central bank's daily repo window on Monday to meet their fund requirements. Last week also banks drew from RBI’s short-term liquidity adjustment facility (LAF) to meet the outflow on account of advance tax payment due date on March 15.
The finance minister said many PSU banks are having statutory liquidity ratio in excess of statutory requirement of 23% and earning interest on them rather than lending to corporates.
The statement would build the pressure on the RBI to ease the liquidity situation in the mid-quarterly review by lowering the cash reserve ratio and reducing the key policy rate.
State Bank of India Chairman Pratip Chaudhuri said a cut of 50 basis points in the interest rates was needed. He, however, added SBI’s liquidity position was comfortable as the bank was sitting on Rs 30,000-40,000 crore and the government was also disbursing capital.
“We have requested 50 basis points in CRR and 0.50% cut in Repo. We have also requested to increase the export credit refinance which is currently 50% of the rupee credit. We have requested them to increase it to 100%,” he told reporters.
In the limited review meeting with the state-run banks, the finance minister also discussed the state of stalled as well as new projects where banks have disbursed or sanctioned loans.
In sectors like power, coal, iron, steel and road transport 215 projects with an investment of Rs 7 lakh crore are currently stalled and banks have disbursed Rs 54,000 crore. The projects are stalled mainly due to issues related to coal linkage, environment clearances and land acquisition. There are 126 new projects with an outlay of Rs 3.55 lakh crore and the amount sanctioned by banks is Rs 43,000 crore.
“Now there is a movement in iron, steel and cement. Real problem is in road and power. There are 68 new projects in the road sector. There are 40 new projects in the power sector. We have to get them going,” Chidambaram said, adding the finance ministry would start taking sectoral meetings with state governments and promoters to see how the government can move these forward.
Asked about charges of money laundering by certain employees of three private sector banks, he said the RBI and the Finance Ministry are looking into the issue. “Secretary, Financial Services is looking at it closely. RBI is looking at it closely. They (banks) themselves have instituted enquiries. Let's give them a Little time to come up with the report of the enquiry,” he added.
On the proposed all women bank, Chidambaram said the expert committee headed by M B N Rao for the purpose met for the first time on Saturday and the panel will give a blueprint on the bank by April end. He added said all PSU banks have also shown interest in opening all-women branches. In next six months, he said, all state-run banks will have such branches.
