RBI could have cut CRR too: KVB chief

“The RBI has the habit of springing a surprise. Though the market expected a 25 basis points cut, I expected a 50 bps cut in the repo rates,’’ said the Managing Director and Chief Executive of Karur Vysya Bank, Mr K.Venkataraman.

He, however, felt that it could have been more enhanced if it had come with a 25 bps cut in the Cash Reserve Ratio (CRR) as well.

(CRR refers to the liquid cash that banks have to maintain with the RBI as a certain percentage of their demand and time liabilities).

According to him, a 25 bps cut in repo rate would not have made any impact as the problem of liquidity persisted.

Asked if KVB would pass on the reduction to its customers, he said “this definitely gives room for reducing both the deposit and lending rates. But unless the general rate scenario comes down, a reduction in the rate will not be possible.’’

Karur Vysya Bank, according to Mr Venkataraman, did not face any liquidity problem. “But funds have become costly because of tightening measures. Investments have slowed and there is no point in keeping the funds locked up,’’ he added.

‘It’s more than what was expected’

While the KVB chief maintained that he expected a 50 bps cut in repo rates, Mr V.P. Iswardas, Chief Executive and Managing Director of Catholic Syrian Bank, said “it is more than what was expected’’.

CSB has, only a fortnight ago, effected a 25 bps cut in its deposit rates. “We will therefore review our stand in the next ALCO (Asset Liability Committee) meeting,’’ he said, when asked if the bank would be passing on the reduction to its customers.

According to him, there was no dearth in the flow of NRE deposits. “It continues to flow. We have made some minor corrections on the NRE deposit rates too. The rates are more or less equal to our domestic term deposit rates,’’ he added.