How CRR Cut Impacts Banks? Here’re The Top Beneficiaries

The Reserve Bank of India (RBI) has slashed the Cash Reserve Ratio (CRR) by 50 basis points to 4% today. RBI Governor Shaktikanta Das said that a CRR cut will infuse cash worth ₹1.16 lakh crore into the banking system.

CRR is a regulatory measure under which banks are required to keep a certain percentage of their total deposits with the RBI. The move will stem liquidity into the system, thereby ensuring a sound credit growth.

Citi released a note entailing the impact of Net Interest Income (NII) or core income of banks following the CRR cut. Here’s a look at how banks will be impacted.

1. State Bank of India

Cash Reserve Ratio (CRR) of India’s largest public sector bank stands at 4.7%. A cut by 50 bps can bring the figure down at 4.2%. Citi estimates that Net Interest Margin (NII) of SBI following the cut can boost by ₹17,028 crore, which is 0.8% of its annual Net Interest Income.

2. HDFC Bank

The cash reserve ratio (CRR) of HDFC Bank is 6.3%, which is set to come down to 5.8% post CRR cut. The decision can bring in ₹9,257 crore, which is 0.66% of its annual NII and 0.78% of its pre-provisioning operating profit.

3. ICICI Bank

ICICI Bank has a CRR of 5.5% and a 50 bps cut can bring this down to 5%. RBI’s decision can infuse ₹4,867 crore to its Net Interest Income, which is 0.5% of its annual NII and 0.62% of pre-provisioning operating profit.

4. Punjab National Bank

Following the CRR cut, the Net Interest Income (NII) of PNB can increase by ₹4,596 crore, which is nearly 1% of its annual core income