Bankers in their meeting with the Reserve Bank of India (RBI), on Thursday, made a forceful plea against raising cash reserve ratio (CRR) further to suck out excess liquidity in the banking system.

Simply put, banks do not want any monetary actions that have direct implications on interest rates, as they are already grappling with high deposit and lending rates amid flush liquidity and stagnant credit growth.

Bankers, led by State Bank of India Chief O P Bhatt, had their meeting with RBI Governor Yaga Venugopal Reddy as part of RBI’s consultation process ahead of its second quarterly review of the monetary policy on October 30.
RBI has raised CRR by 200 basis points since December 2006 to seven per cent.

All the same, there are still expectations that the RBI would either raise the ceiling on bonds the government can issue under the market stabilisation scheme (MSS) or raise CRR for absorbing liquidity.

As liquidity is very high in the banking sector with RBI absorbing Rs 57,480 crore through reverse repo auctions to this day, about twice the amount it sucked daily in the last week of September 2007.