No plan to pay interest on cash reserve ratio: RBI

The governor did not provide any definite number about the number of bank licences to be issued

July 04, 2013 3:32 IST | India Infoline News Service
Reserve Bank of India governor D Subbarao today said the central bank has no plan to pay interest on cash reserve ratio.

Speaking about fraudulent schemes, Subbarao said the RBI team will study why villagers are attracted towards fraudulent schemes.

The governor did not provide any definite number about the number of bank licences to be issued. However, not all eligible applicants may get licences for new banks.
Subbarao was addressing a press conference after a board meeting.

Markets displayed intra-day gains in the afternoon session today with banking shares inching lower after the Subbarao said that the monetary policy transmission is not as quick as needed.

At 02:15PM, the benchmark Sensex was up 132 points at 19,312 and the 50-share Nifty gained 35 points at 5,706 levels.

On Wednesday, finance minister P Chidambaram met the heads of public sector banks and urged them to lend money at cheaper rates.

According to the minister, the objective is to stimulate consumer demand, the main driver of a sluggish economy that has been pulled down by high inflation and interest rates.

The RBI has reduced its key short-term lending rate (repo) by 1.25 percentage points since January 2012, but banks have passed on only 0.3% to consumers.
Only state-run Bank of India will cut its base rate, the rate below which it cannot lend to customers, to 10% from 10.25% with effect from 8 July.

This will be the first rate cut by a public sector bank after RBI kept its policy rates unchanged at its mid-quarter monetary policy review on 17 June.

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