Joining the club which supports the reduction of Cash Reserve Ratio (CRR), Prime Minister’s Economic Advisory Council’s chairman, C Rangarajan, said that the country needs to move towards a situation where cash reserve ratio (CRR), or the portion of deposits banks keep with the Reserve Bank of India (RBI), is lowered and that its use as an instrument of ‘credit control’ be exercised only in extraordinary conditions. Rangarajan, on the sidelines of FICCI-IBA banking conference, averred that, as ‘Open market operations (OMOs) will become increasingly major instrument, while the role of CRR, as credit control, will come down.’
Rangarajan’s comments come in wake of a bitter spat between RBI’s deputy governor K C Chakrabarty and State Bank of India chairman Pratip Chaudhuri on CRR abolishment issue. RBI Deputy Governor K C Chakrabarty recently snubbed SBI's chairman Pratip K Chaudhuri for his remarks suggesting abolition of CRR, bluntly telling him that he has to find 'some other place' if he could not work as per the central bank's regulatory environment.
Meanwhile, reinforcing the belief in the current state of the economy, C Rangarajan expects the economy to grow at 6.7 per cent in 2012-13, and further to 8 percent in another two years. Furthermore, he underscored that lower base in the second half of last year would help India’s gross domestic product to register higher growth in the current financial year.
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