The RBI had recently hiked the CRR by 0.5 per cent which was to be implemented in two phases. First 0.25 per cent increase was to come into effect from December 23, 2006, and the next 0.25 per cent was to be effective from January 6, 2007.
The central bank had said, at that time, that the CRR was hiked in order to sustain the inflationary pressures and the growth momentum of the GDP in the economy.
The increase led to the call rate increasing to their nine-year high of 19 per cent.
With borrowing costs going up in the money market, banks are trying to lure depositors with higher rates for term deposits.
They raised short-term deposits of 7-15 days from mutual funds at 15-20 per cent. Even public sector and private sector banks raised one-year certificate deposits at 9.25-9.5 per cent.
''Lack of funds has crippled the working of the industry and may seriously hamper the growth if the urgent steps are not taken by the RBI. It should put a haul on the series of increase in CRR.
The previous increment should be withdrawn as a measure in the interest of the economy,'' Assocham President Anil K Agarwal said.
Following the CRR hike, the government has already parked Rs 53, 634 crore with RBI until the end of last week, which blocked the liquidity in the system.
This year, the first hike was announced by the central bank for the fortnight beginning September 18 when the CRR was raised from 4.5 per cent to 4.75 per cent and then to 5 per cent in the fortnight beginning October 2.