'Will bring down cost of funds': Bankers welcome RBI move to cut CRR

Mumbai, Dec 6 (PTI) Bankers hailed the RBI's decision for cutting 0.50 per cent cut in the cash reserve ratio (CRR) as one that will help bring down the cost of funds for the lenders.

With the cut, the CRR reduced to 4 pc from 4.5 pc, a move that will help unlock Rs 1.16 lakh crore bank funds.

"Banks will have additional resources for lending to the productive sectors. This will also result in lower cost of funds for the banks," industry grouping IBA's Chairman M V Rao said.

Rao, who also serves as the chief executive and managing director of state-run Central Bank of India, said the CRR cut will help infuse Rs 1.16 lakh crore into the system and the cut will help in keeping interest rates benign.

Country's largest lender SBI's chairman CS Setty termed the policy as "pragmatic and candid".

"The cut in CRR by 50 bps, raising the FCNR (B) deposit rates, development of the Secured Overnight Rupee Rate (SORR) benchmark and revision in limit of collateralised agriculture loans are all positive for banks," he said.

Setty added that the decision to form a committee to investigate the issue of ethical AI in financial services and use of technology to detect mule accounts is a timely one.

Among the private sector lenders, Tamilnad Mercantile Bank's Managing Director and Chief Executive Salee S Nair called the status quo in the repo rate as a "positive step", and welcomed the action on agriculture sector to increase the limits on collateral-free loans.

"The MPC's decision to hold repo rate in the face of slower growth, shows its focus on reining in inflation," Standard Chartered Bank's Zarin Daruwala said, welcoming the regulatory and development moves.

Among the non-banks, Tata Capital's Rajiv Sabharwal said the decision to hold the repo but cut the CRR reflects a balanced approach that encourages growth while ensuring price stability. PTI