CREDIT POLICY
GOVT & ECONOMY
COMMENTARY
INTERVIEWS
BUDGET
SPECIALS
CHAT
ARCHIVES
SEARCH REDIFF

Bankers hail Jalan's moves; views mixed on review of PLR, deposit rates

Leading bankers have welcomed the Reserve Bank of India's mid-term Credit Policy for 1999-2000.

''The overall policy is quite good, as there would be ample liquidity in the system with the reduction of CRR cut by one per cent,'' said G G Vaidya, chairman, State Bank of India.

It is certainly good that liquidity of over Rs 80 billion would be available in the banking system with the reduction of CRR cut and withdrawal of FCNR (B) liabialities, he added.

On being asked about the credit offtake for such a huge amount in the banking system, Vaidya replied positively. K Kannan, chairman, Bank of Baroda, however was a little unhappy over the reduction of cut in CRR and said that his bank would have to take an immediate review of deposit rates. Kannan said that the RBI governor has discussed most of the issues with the bankers except the CRR cut.

''Now there would be huge liqudity in the banking system and therefore there won't be a problem of liquidity but of deployment of funds for the banks. BoB will have to take an immediate review of overall deposit rates,'' Kannan said.

According to RBI's Credit Policy, CRR cut by one percentage point will release additional lendable resources of Rs 70 billion and withdrawal of the incremental CRR of 10 per cent will release lendable resources of Rs 10.60 billion, thus bringing the total of lendable resources' worth to Rs 80.60 billion in the banking system.

Meanwhile, the bankers however ruled out immediate review of their Prime Lending Rate in response to the RBI's decision allowing them to take decision in this regard by themselves, in the light of various factors including their own cost of funds, their transaction costs and interest rate ruling in the non-banking sector.

R S Hugar, chairman, Corporation Bank welcomed the RBI's Credit Policy and praised the RBI Governor Dr Jalan for various positive announcements.

A visibly happy Hugar said that the reduction of CRR cut will certainly make a positive impact on the banking system. He advocated use of huge liquidity for various purposes. ''Lending is not the only option for use of huge lendable resources as there are several other options with us and we will ensure that we would gain profit on lending,'' he said.

Praising the RBI's policy, Hugar said the policy has addressed problems faced by banks.

He however ruled out any possibility of reviewing deposit rates and PLR by his bank and said, ''I do not foresee immediate review of these rates.''

P S Subramanyam, chairman / chief trustee, Unit Trust of India, also welcomed the RBI's credit policy and various measures. ''More money will come in to the banking system with measures announced by RBI and this will give relief for the banking industry,'' he said.

Commenting on various modifications for further development of money market, bankers said that inclusion of MMMFs within the purview of Securities and Exchange Board of India will not make much of an effect on the system. It is just a change in regulatory authority.

UNI

ALSO SEE

RBI Governor Bimal Jalan's policy statement

RBI's Credit and Monetary Policy 1999-2000

RBI's Credit and Monetary Policy 1998-1999

Business