......The RBI’s focus should continue to be on inflation, though there is considerable pressure on it from the banking and the corporate sectors, and also the Government, to loosen up policy in the interest of growth. Such liberalisation can be in two ways. One is a further reduction in the banks’ cash reserve ratio (CRR) that will release primary liquidity. The other is a decrease in policy (repo and reverse repo) rates by the RBI. Under the current circumstances, the reduction in policy rates is preferable to that in CRR.......
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It is comforting to find at least a mention of excess SLR maintained by banks while on liquidity in the system. Somewhere someone has to start talking about it. Similar is the case of PSUs and corporates sitting on huge amounts of cash. Ignoring excess SLR and huge cash hoarded by corporates while system needs liquidity is a problem similar to domestic stock of gold not being productively exploited, while allowing outflow of precious forex for import of gold. Spokespersons of GOI, analysts and media commentators are getting over-exercised about CRR and repo rates, even to the extend of not allowing any thoughts about other measures by GOI and RBI for realignment of fiscal and monetary policies considering the changing needs.
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