A small hike in CRR will not hurt
Hindu Business Line, January 22, 2010, Page 6
Will reduce liquidity, ease inflation concerns: Naina Lal Kidwai.
Our Bureau, New Delhi
Pointing to the high inflation and sufficient liquidity in the system, HSBC India Country Head, Ms Naina Lal Kidwai, said on Thursday that the Reserve Bank of India has room to increase the cash reserve ratio (CRR) by 25 basis points. CRR is the amount of money that banks have to keep with the RBI. The central bank is expected to make its monetary policy review announcement on January 29.
Ms Kidwai, however, cautioned against withdrawing the stimulus in a hurry as it was important to sustain the growth momentum. She also said according to HSBC research, the country would grow by over 7.5 per cent this fiscal and 8.5 per cent in the coming one.
“There is a lot of liquidity in banks, over Rs 80,000 crore. It may be needed in the longer term as projects and credit off-take go up. But there is room for some of it to be mopped up in the near term. A small CRR hike of 0.25 per cent would mean just about Rs 8,000 crores going out of the system. It doesn't hurt anybody or destroy the growth momentum,” Ms Kidwai told presspersons here on the sidelines of a Ficci-event on microfinance.
Noting that high inflation is a concern, she said a CRR hike would signal an important change, but may not upset the applecart.
Asked about the possibility of withdrawal of the stimulus announced by the Government and the RBI to counter the economic slowdown, she said, “The desire of our policy makers has to be to ensure that India stays on its growth trajectory. I don't think we should be in a hurry to withdraw the stimulus because it is carrying growth forward.”
Ms Kidwai said in due course of time, the stimulus will have to be rolled back bearing in mind the fiscal deficit.
On interest rates, she said, “I don't think interest rates are going to go up hugely in a hurry. But it might increase in the next six months.”
On the banks' credit growth, Ms Kidwai said it will definitely be lower than that of last year. “Last year companies had no other recourse to funds than the banks. But every corporate has turned to the capital markets in the last six months,” she said
“However, I believe corporates will begin to turn back to the banks. There is every indication that companies are looking at capacity addition,” she added.
Hindu Business Line, January 22, 2010, Page 6
Will reduce liquidity, ease inflation concerns: Naina Lal Kidwai.
Our Bureau, New Delhi
Pointing to the high inflation and sufficient liquidity in the system, HSBC India Country Head, Ms Naina Lal Kidwai, said on Thursday that the Reserve Bank of India has room to increase the cash reserve ratio (CRR) by 25 basis points. CRR is the amount of money that banks have to keep with the RBI. The central bank is expected to make its monetary policy review announcement on January 29.
Ms Kidwai, however, cautioned against withdrawing the stimulus in a hurry as it was important to sustain the growth momentum. She also said according to HSBC research, the country would grow by over 7.5 per cent this fiscal and 8.5 per cent in the coming one.
“There is a lot of liquidity in banks, over Rs 80,000 crore. It may be needed in the longer term as projects and credit off-take go up. But there is room for some of it to be mopped up in the near term. A small CRR hike of 0.25 per cent would mean just about Rs 8,000 crores going out of the system. It doesn't hurt anybody or destroy the growth momentum,” Ms Kidwai told presspersons here on the sidelines of a Ficci-event on microfinance.
Noting that high inflation is a concern, she said a CRR hike would signal an important change, but may not upset the applecart.
Asked about the possibility of withdrawal of the stimulus announced by the Government and the RBI to counter the economic slowdown, she said, “The desire of our policy makers has to be to ensure that India stays on its growth trajectory. I don't think we should be in a hurry to withdraw the stimulus because it is carrying growth forward.”
Ms Kidwai said in due course of time, the stimulus will have to be rolled back bearing in mind the fiscal deficit.
On interest rates, she said, “I don't think interest rates are going to go up hugely in a hurry. But it might increase in the next six months.”
On the banks' credit growth, Ms Kidwai said it will definitely be lower than that of last year. “Last year companies had no other recourse to funds than the banks. But every corporate has turned to the capital markets in the last six months,” she said
“However, I believe corporates will begin to turn back to the banks. There is every indication that companies are looking at capacity addition,” she added.
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