Indian banks urge central bank to boost liquidity

Will assist growth and increase demand for manufactured goods.

State Bank of India Chairman Pratip Chaudhuri said Indian banks have made their recommendations to the Reserve Bank of India for releasing liquidity, making it more accessible and making it less expensive.

Chaudhuri said that among the recommendation are a cut in the cash reserve ratio; a cut the repo rate and not restricting the marginal standing facility (MSF) to a particular number but whatever excess statutory liquidity ratio banks hold should be available for the MSF.

MSF allows banks to borrow money from the central bank at a higher rate when there is significant liquidity crunch.

In mid-July, RBI raised the bank rate and the MSF to banks by 2% to 10.25%, making the loans more expensive in an effort to control the plunge of the rupee against US dollar.

"We think this tightening of the liquidity and making it more expensive of course may have been helpful in containing or arresting decline of the rupee but it has its collateral cost in terms of growth of economy," Chaudhuri said.

RBI is scheduled to announce the mid-quarter review of the monetary policy for 2013-14 on September 20.