BANGALORE, Aug 30: ICICI Bank Chairman K V Kamath today disagreed with the suggestion of SBI chief Pratip Chaudhuri that RBI should scrap CRR, saying it is part of the monetary policy and no issue can be made of it.
Asked to comment on the vocal slugfest between Chaudhuri and RBI Deputy Governor K C Chakrabarty on the topic, Kamath said in the whole issue of monetary policy, several tools are being used, including Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio.
CRR is the portion of deposits kept by banks with the Reserve Bank on which no interest is paid.
“I think the monetary authority (RBI) in its wisdom uses all these tools as appropriate and that’s what is being done. This (CRR) is nothing new. India always had a CRR for as long as I can remember and I don’t think honestly (there is) an issue to be made here”, he told reporters.
“You should look at it (CRR) as part of monetary policy that it is exercised and part of it is liquidity policy for the banks”, added Kamath, also non-executive Chairman of Infosys Ltd. Earlier, he addressed the eighth India Innovation Summit, organised by CII.
Last week, Chaudhuri made a strong pitch for the abolition of CRR, saying that keeping required funds with the Reserve Bank without any interest was costing the banking system about Rs 21,000 crore.
He called for phasing out of CRR, saying it would allow banks to lower lending rates. If the RBI can’t do away with it, it should at least pay some interest on CRR since banks pay their depositors, he had said.
Chaudhuri had also contended that “the CRR policy has possibly denied the country growth, income and employment”, and argued that since RBI does not pay any interest on CRR, this acts as a tax on the banking system.
Chakrabarty had this week frowned on Chaudhuri’s contention on phasing out CRR. “If the SBI chairman is not able to do business as per our regulatory environment, he has to find some other place,” he had said. (PTI)
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