Mumbai, Aug 27: Making a strong case for abolition of cash reserve ratio, country's largest lender, the State Bank of India (SBI) chairman today said the banks were unable to use the resources more productively, which is lying with the central bank without any interest earning.
Though CRR, the amount of capital that banks park with the RBI, doesn't pay any interest to banks, RBI views it as a cushion against any liquidity crisis in the system.
Earlier in the day, the deputy governor of RBI K CChakrabarty had said that banks had to work in the regulatory environment of the country.
“If the SBI chairman is not able to do business as per our regulatory environment, he has to find some other place,” RBI Deputy Governor K C Chakrabarty said in a sharp reaction to Chaudhuri's recent comment that CRR does not help anybody and it was unfairly put on banks.
However, Pratip Chaudhari, chairman of SBI also defended his views on CRR saying that when the deputy governor was a bank chairman, he was asking for the same.
Chaudhari also said that when the CRR rate was high and GDP was low, there was a strong inverse co- relationship. He also said if CRR is a inflation tool, then other sectors like insurance and NBFC should also have such norm.
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