Chennai, May 29: Admitting that liquidity conditions were tight, State Bank of India Chairman Pratip Chaudhuri today made a case for reduction of the Cash Reserve Ratio (CRR) by the Reserve Bank to bring down overall interest rates for the benefit of industry.
“Indian industries are becoming uncompetitive because of higher interest rates. If you want moderation in interest rates, the most painless method is to cut the Cash Reserve Ratio (CRR)”, he told reporters here.
CRR, is the portion of deposits which banks are required to keep with the Reserve Bank in cash. On March 9, the central bank had cut CRR by 0.75 per cent to 4.75 per cent. In January, too, RBI had reduced CRR by 0.50 per cent to ease liquidity position in market.
RBI is expected to take a call on monetary measures in the
mid-quarter review scheduled on June 18. On the liquidity conditions, Chaudhuri said, “it is better than earlier. But I still think the liquidity is still tight in our feeling.”The bank, he added, is planning to reduce interest rates in the SME sector.
“It will be deep rate cuts ranging from 2 to 3 per cent.
Currently, rates range from 12-17 per cent and it will be
brought down from 10.5-15.5 per cent,” Chaudhuri added. Chaudhuri said SBI's net interest margin was good.“Now, this has been possible due to a very good net interest margins. Our net interest margins are 3.85 on an aggregate and 4.17 for domestic, which is possibly highest,” he added.
Gross NPAs have dropped to 4.4 per cent compared to 4.6 in the previous quarter and the net NPA has dramatically dropped from 2.2 per cent to 1.8 per cent. The bank has generated internal surplus of Rs 11,700 crore, he said.
He said that the bank will recruit 9,500 people across the country.
