RBI may ease norms for infrastructure funding

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

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