HomeEconomy NewsGovernment makes a pitch for a CRR cut, says RBI must deliver on providing liquidity

Government makes a pitch for a CRR cut, says RBI must deliver on providing liquidity

Concerned about a credit crunch in non-banking financial companies (NBFC) and IL&FS issue, the centre on Tuesday made a pitch for a Cash Reserve Ratio (CRR) cut as the best option to boost liquidity in the market, government officials privy to the developments told CNBC-TV18.

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By Sapna Das  September 26, 2018, 7:55:20 AM IST (Updated)

Concerned about a credit crunch in non-banking financial companies (NBFC) and debt-ridden Infrastructure Leasing & Financial Services (IL&FS) issue, the centre on Tuesday made a pitch for a Cash Reserve Ratio (CRR) cut as the best option to boost liquidity in the market, government officials privy to the developments told CNBC-TV18.



This comes after union finance minister Arun Jaitley held a long meeting with the Reserve Bank of India (RBI) deputy governors NS Vishwanathan and Viral Acharya, finance secretary Hasmukh Adhia and department of economic affairs (DEA) secretary Subhash Chandra Garg.

The apex bank could also consider buying more bonds from the open market and open a special window for mutual funds to inject liquidity, according to multiple people familiar with the development.

According to government officials, there should not be any credit freeze and the RBI will have to ensure enough liquidity in the market.

While RBI DGs refused to comment on the agenda of the meeting, it’s understood that RBI officials and finance ministry took stock of the macro economic situation with regard to exchange rate, crude prices and the current account deficit, and the possibility that measures to enhance liquidity were discussed, is not ruled out.

The meeting also discussed IL&FS issue, which was attended by SBI chairman Rajnish Kumar, LIC chairman VK Sharma and top finance ministry officials.

Later, LIC chairman said on record that “we will ensure that ILFS does not collapse and there’s no contagion impact. He added “all options are open” to a query if LIC will raise its stake further in ILFS.

Earlier in the day, Jaitley addressed 21 public sector banks, in their annual performance review meet. This will be followed in the evening by Jaitley’s media briefing where presentations regarding the “new initiatives” taken in today’s meeting, will be shared.