State Bank of India chief snubbed by RBI on CRR comments

State Bank of India (SBI) Chairman Pratip K Chaudhuri was snubbed for his remarks suggesting abolition of Cash Reserve Ratio (CRR), when Reserve Bank of India (RBI) Deputy Governor K C Chakrabarty bluntly told him to find "some other place" if he could not work according to the central bank's regulatory environment.

"...if the SBI Chairman is not able to do business as per our regulatory environment, he has to find some other place," Chakrabarty said in a sharp reaction to Chaudhuri's recent comment that CRR does not help anybody and it was unfairly put on banks.

Chakrabarty was responding to a question by a student of Great Lakes Institute of Management near Kancheepuram (Tamil Nadu) during its third annual financial conference "Systemic Risk".

To another query as to "which banking tree needed to be protected", Chakrabarty, drawing an analogy to forest fire, said: "Obviously it is the SBI. SBI is too big a tree. If you fail to protect SBI tree, it (the fire) may spread on to other banks and it will turn out to be a systemic failure."

Chaudhuri had questioned why CRR was not applied to insurance companies, non-banking financial companies and mutual funds, who are also mobilising public deposits.

"CRR doesn't help anybody and it is unfairly put on the banks," the chief of the country's largest public sector SBI had said last week.

Keeping required funds with RBI without any interest was costing the banking system about Rs 21,000 crore, Chaudhuri had said. CRR is the amount of deposits banks keep with RBI in cash.

In its quarterly monetary policy review, RBI had last month retained the CRR at 4.75 per cent and reduced the Statutory Liquidity Ratio (SLR) - the amount of deposits banks park in government bonds - by 1 per cent to 23 per cent, effective August 11.

It had also left key interest rates untouched, a move that disappointed industry and retail borrowers.