Another CRR hike looms

The Reserve Bank of India (RBI), which has already raised the cash reserve ratio (CRR) thrice since December last year, is contemplating another hike, though only on incremental deposits this time.

There is a buzz in the market that the decision can come tomorrow. Sources in the banking system, confirming that a hike was definitely an option, said the decision could come tomorrow or later.

CRR is the percentage of deposits that banks are required to keep with the RBI.

THE COST OF INFLATION CONTROL
Date

Action
March 30, 2007 CRR hiked by 50 bps to 6.5%; Repo rate
hiked by 25 bps to 7.75%
Feb 14, 2007 CRR hiked by 50 bps to 6%
Jan 31, 2007 Repo rate hiked by 25 bps to 7.5%
Jan 31, 2007 General provisioning on standard
commercial real estate loans, personal
loans & capital market loans doubled to 2%
Dec 11, 2006 CRR hiked by 50 bps to 5.5%
Oct 31, 2006 Repo rate raised by 25 bps to 7.25%
July 25, 2006 Reverse repo and repo rates hiked 25 bps
each to 6% and 7% respectively
June 8, 2006 RBI raises reverse repo and repo rates by
25 bps to 5.75% and 6.75%, respectively

According to the sources, banks may have to maintain an increased CRR on additional deposits garnered since April 1. Bank deposits have increased by Rs 11,218 crore to Rs 26,86,813 crore since April 1.

Deposits taken earlier will attract only the existing rate of 6.5 per cent.

Read more in The Business Standard article.