............."If a CRR cut cannot be done due to inflation worries, let the RBI pay us interest on CRR. We will then do the transmission for sure. If the RBI pays me Rs 500 crore on interest on my CRR, I promise to transmit the entire Rs 500 crore to borrowers by reducing my base rate,".............
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Let us not presume that SBI Chairman is not briefed correctly about the concept of CRR in the Indian context, or about the times when central bank had paid interest on CRR accumulations above certain threshold levels and why or when the practice was discontinued. Coming to the limited offer from him to ‘pass on’ entire benefit from a CRR cut, in these days of Direct Benefit Transfer, RBI could as well consider crediting such benefit direct to the borrowers’ accounts on the basis of information furnished by banks, instead of using banks as a ‘conduit’. The demand from SBI Chairman is comparable to a tax payer telling GOI to treat ‘tax’ as borrowing from him and pay interest at market rate or stop collecting tax.
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