New Delhi: Amid economic slowdown, State Bank of India Tuesday said it expects the Reserve Bank to cut Cash Reserve Ratio (CRR) by 1 percent to boost growth as well as to improve profitability of banks.
"We expect the RBI to cut CRR by 1 percent...We have made a request but it for RBI to take a call. We would be happy if there is one percent CRR cut. It will recharge lot of investors sentiments, the economy and also stock markets," SBI Chairman Pratip Chaudhuri told reporters on the sidelines of a meeting of heads of PSU banks with the Finance Minister.
CRR is the the portion of deposits that banks are required to keep with the central bank.
Chaudhuri said CRR was a more effective tool in spurring growth than policy rate reduction by the central bank.
"CRR cut is definitely more useful. CRR cut is any day six times more effective than a rate cut," he said.
If there is CRR cut, Chaudhuri said, it will improve the profitability of banks and it would reduce the requirement of government to re-capitalise the banks.
"For example, if there is 1 percent CRR cut, it will release Rs 60,000 crore in the system which will help banks to earn Rs 5,000 crore of additional profit," he said.
The Reserve Bank of India (RBI) in its mid-quarter review of monetary policy on June 18 is widely expected to announce steps to boost sagging economic growth, which dipped to nine-year low of 6.5 percent in 2011-12.
Meanwhile, as per the latest data released by the Central Statistical Organisation (CSO), industrial production growth rate during April slowed to 0.1 percent from over 5.3 percent in the same month a year ago.
On the liquidity situation in the system, Chaudhuri said, it is just about average and not comfortable because banks are borrowing three-month money at 9.5 percent.
In order to infuse liquidity in the market, RBI had on March 9 cut CRR by 0.75 percent down to 4.75 percent. In January, it had reduced CRR by 0.50 percent to unlock primary liquidity.
Asked about the first quarter performance of the bank, Chaudhuri said, "Numbers are good. Net profit we have not calculated but the margins are definitely improving.
"NIM (net interest margin) is better than what we expect. We had given the guidance of 3.75 percent (for the entire 2012-13). I think we will better that."
The outlook on NPA is good, he said, adding, "we seem to be in control. It will be depend on monsoon."
The gross non-performing assets (NPAs) as a proportion of advances of SBI went up to 4.44 percent in 2011-12 against 3.28 percent at the end of March last year. Net NPA also rose to 1.82 percent during the year from 1.63 percent.
PTI
First Published: Tuesday, June 12, 2012, 14:02