Bangalore: Ahead of the Reserve Bank of India’s (RBI) mid-quarterly policy review, State Bank of India (SBI) said a cut in cash reserve ratio (CRR) will give a room to banks for lowering interest rates.

“More the RBI cuts CRR, greater will be the ability of banks to reduce rates,” SBI chairman Pratip Chaudhuri said.

Cash reserve ratio (CRR) is the portion of deposits which banks are required to keep with the central bank.

On March 9, the central bank had cut CRR by 0.75 per cent to 4.75 per cent. In January, too, RBI had reduced CRR by 0.50 per cent to ease liquidity position in market.

Mid-quarter review of monetary policy 2012-13 is scheduled for June 18.

Chaudhuri said since RBI had slashed CRR, the SBI reduced interest rates on car and education loans and is making deep cuts in lending to small and medium sized enterprises (SMEs).

To another query, he said at present tier-I capital adequacy ratio is at 9.67 per cent. Hence SBI was not stressed for capital and profitability is expected to be good. He said interest margins available at April end are very robust. SBI has already given a guidance that NIM, at 3.85 per cent last year would be a minimum 3.75 in the first quarter.

On merger of State Bank of Mysore with SBI, he said the economic rationale for merger is as strong as ever, but merger requires capital.

“It will therefore receive some attention as we have just finalised our annual results. We will see how to proceed during the present financial year,” he said.

He further said the bank is under stress, articularly in agriculture and SME areas. Many of our SMEs are having difficulty realising payment of the supplies made, particularly relating to state government utilities, he said.