New Delhi: Interest rates have been rising in the recent past from home loans to the rate paid by the corporate sector to borrow funds.
One of the main reasons has been the crunch on funds available to banks in the market.
On Tuesday bankers met the Reserve Bank of India to find solutions to a liquidity crunch.
Bankers and RBI discussed liquidity, interest rate, and farm loan issue. They also discussed on credit growth, and fund raising problems.
Senior bankers, who met the RBI Governor Y V Reddy, said that there is tightness in liquidity in the banking system as deposit mobilisation lags credits off take.
"Buoyed by the eight per cent growth in the economy, the credit growth is outstripping the deposit mobilisation in the system. There is a demand for larger credit from across the sectors. Hence, there is a tightness in the liquidity," Indian Banks' Association Chief Executive H N Sinor said.
However, it is learnt that the bankers discussed the issue of reducing Cash Reserve Ratio (CRR) - which refers to the percentage of funds that commercial banks are required to park with RBI.
Bankers were of the opinion that a two-percentage point reduction in CRR from the current level of five per cent could release around Rs 40,000 crore in the system.
"We have appraised the RBI Governor about the deposit growth and loan growth and discussed other issues, including interest rates," Sinor said.
RBI once again maintained the Reference rate for the US currency at Rs 44.6600 per dollar even as the single European unit was fixed Rs 53.6400 per Euro as against Rs 53.7900 on Monday.
With Agency inputs
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