SBI in talks with RBI to lower cash reserve ratio requirement on green deposits

State Bank of India chairman discusses talks with Reserve Bank to reduce cash reserve ratio for green deposits.

State Bank of India chairman Dinesh Khara on February 16 said the nation's largest lender is in talks with the Reserve Bank to reduce the cash reserve ratio requirement on green deposits.

State Bank of India (SBI) last month announced a green deposit scheme, a first in the domestic banking, to attract long-term retail deposits to be used only to fund green transition projects or climate-friendly projects.

The bank said such deposits will be priced 10 basis points lower than normal deposit rates.

Cash reserve ratio (CRR) is the minimum amount of cash that a bank needs to keep reserved with the central bank against its total deposit.

At present, the CRR is pegged at 4.5%, which means that every one rupee that a bank collects in deposits, 4.5 paise should be parked with the Reserve Bank as a solvency measure. Banks don't earn any interest from the amount reserved with RBI.

"We are engaging with the regulator for a reduction in the CRR for green deposits and secondly, if at all as a policy, it can be incorporated into the regulator policy mechanism. Early beginning has happened from the regulator's side also but maybe it will take two to three years to start having an impact on the pricing too," Mr. Khara said at an event organised by the Indian Institute of Management Kozhikode here.