RBI: Interest rates on loans may remain high due to liquidity problems with banks
New Delhi| Liquidity problems with banks are continuously increasing. In such a situation, some market participants have demanded RBI to increase liquidity in the system, so that banks can lend easily. The group of participants met central bank officials late on Thursday night and also suggested measures to deal with it. If liquidity problems persist in the banking system, interest rates on credit are likely to remain high. This may affect the pace of lending, especially when the country’s economic growth is slowing down.
According to sources, some bankers also suggested a temporary reduction in the cash reserve ratio (CRR) for banks. This will increase the cash with banks. CRR is the part which banks keep with RBI. The liquidity of the banking system has been continuously falling since mid-December.
The daily average decrease in the last five weeks has been around Rs 1.50 lakh crore. Bankers said that the one night rate of money they are taking from RBI remains above their minimum marginal standing facility rate. This means that banks are borrowing from RBI at higher interest rates. In such a situation, banks will also lend to customers at higher interest rates.
