Ease reserve requirement to boost liquidity: Banks to RBI

Lenders have asked the Reserve Bank of India to ease reserve requirements to ensure that lending is not disrupted. The suggestion was made to the central bank in a pre-monetary policy meeting between bank chairmen and Deputy Governor Subir Gokarn on Tuesday. The demand for funds comes as credit growth has been outpacing growth in deposits. "We expect credit to grow by 22-24% this financial year as against 17% growth in bank deposits," said K Ramakrishnan, chief executive, Indian Banks Association. He said that despite a spate of rate increases, bank deposits growth continue to remain sluggish. Banks has also asked the regulator to allow them grant microfinance companies more time to repay loans without having to make provisions on these loans. Typically, any loan where repayment is not made in time needs to be classified a substandard asset with adequate provisions made out of a bank's earnings. Although there has not been any major default arising out of borrowing by an MFI, banks say that defaults are likely if the issue is not resolved soon.