Bankers Urge RBI to Shift to SORR as Benchmark

Key Requests Made by Bankers

1. Shift from WACR to SORR as Overnight Benchmark:
   • Bankers have recommended the Secured Overnight Rupee Rate (SORR) as a more suitable benchmark than the current Weighted Average Call Rate (WACR).
   • This proposal stems from RBI’s ongoing review of domestic rupee interest rate benchmarks, including MIBOR.
   • A special RBI committee had earlier suggested the shift to benchmarks based on secured markets like basket repo and TREP.
2. Cut in Cash Reserve Ratio (CRR):
   • Banks are pushing for a CRR cut from 4%, citing seasonal liquidity pressures due to GST and advance tax outflows.
   • A reduction is seen as essential for smoother monetary transmission and system liquidity.
   • The RBI had already reduced CRR from 4.5% to 4% in two phases in December 2024.

Monetary Policy Review Details

• The Monetary Policy Committee (MPC) will meet between April 7 and 9, with decisions announced on the final day.
• Another 25 basis point repo rate cut (after the February cut to 6.25%) is widely expected.

Bankers’ Liquidity Concerns

• Despite the current surplus of ₹1.93 trillion, bankers forecast outflows of ₹1.8 trillion around April 20, which could neutralize surplus.
• Banks are requesting clarity on RBI’s liquidity comfort level relative to Net Demand and Time Liabilities (NDTL).
• The RBI skipped its 14-day main operation for April 4–17, indicating temporary comfort with surplus.

RBI’s Liquidity Tools in Use

• Dollar-rupee buy/sell swap auctions
• Open Market Operations (OMOs)
• Variable Rate Repo (VRR) auctions
• Expectations are rising that RBI will now use Variable Rate Reverse Repo (VRRR) auctions to absorb surplus liquidity.

Deposit Rates See Cuts; SBI Withdraws ‘Amrit Kalash’ FD Scheme

• SBI has ended its special 400-day fixed deposit (Amrit Kalash) offering 7.10%, effective April 1.
• Other banks are also trimming deposit rates:
  • HDFC Bank: Reduced FDs by 35 bps (35-month) and 40 bps (55-month).
  • Yes Bank: Cut FD rates by 25 bps on select tenures.
• Banks are still cautious in reducing deposit rates due to tight deposit mobilization, even after the RBI’s repo rate cuts.

Liquidity Snapshot