Norms to be eased to free up capital for banks to lend: RBI

MUMBAI: Reserve Bank of India ( RBI) has promised that rules will be changed to free up capital and enable banks to lend more. It would consider easing regulatory provisions on capital adequacy and liquidity coverage ratio in response to suggestions made by the State Bank of India's chief. Arundhati Bhattacharya said that banks are left with very little liquidity to lend after credit picks-up due to these ratios. She pointed out that with high pre-emptions such as cash reserve ratio ( CRR), statutory liquidity ratio (SLR) and liquidity coverage ratio (LCR) and to add to it priority sector loans, there is hardly Rs 40 to lend out of Rs 100.

Banks have to park 4 per cent of their deposits as CRR with RBI, invest 21.5 per cent in government securities as SLR and have LCR of 60 per cent. Also, banks are directed to lend 40 per cent loans to farmers, students and small businessmen as priority sector loans."In long run, we have to bring them down but we can't do it overnight, SLR has come down slowly but we also need a buyer for government securities to emerge," said Rajan.