- The RBI is in talks to relieve banks of CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio) obligations with regard to infrastructure funding
- This might work well with for Narendra Modi’s government as the BJP has promised 100 new cities and high speed bullet trains and so on
- “Today, the investment needs of the economy, especially long-term investment in areas like infrastructure, have increased … To create space for financing, the government has to pre-empt less of the banking system’s assets,” Governor Raghuram Rajan said on Tuesday. Dr. Rajan was delivering a lecture on the Annual Day of the Competition Commission of India in Delhi.
- The CRR and SLR obligation is an cause of concern for lending long term money for infrastructure business requirements
- Since construction lasts for 5-7 years the banks should be able to raise long-tenor money but at present, the raising of such money by banks is burdened with CRR and SLR requirements
- For Infrastructure financing will there ever be relieved with such obligations?
- CRR is the minimum % of deposits a bank must hold as currency chests or deposit with the RBI. SLR is the minimum % of deposits a bank must maintain in the form of gold, cash or other approved securities.
- The RBI is empowered to increase SLR up to 40 %. The CRR and SLR limit the amounts that banks can lend.
- Read at: http://www.thehindu.com/todays-paper/rbi-may-ease-norms-for-infrastructure-funding/article6031312.ece
Exams Perspective:
- SLR (Statutory Liquidity Ratio)
- CRR (Cash Reserve Ratio)
- Infrastructure funding