Kolkata, Apr 13 (IANS): British banking company HSBC Thursday said it is expecting a slash in cash reserve ratio (CRR) during the Reserve Bank of India (RBI)'s credit policy announcement as liquidity in the banking system in the country is a "cause for worry".

The central bank is scheduled to announce the credit policy April 17.

"Liquidity in the system is also a cause for worry. Government borrowing can potentially crowd out the private sector and there is a liquidity issue in the market... We might see further CRR easing from the RBI," Naina Lal Kidwai, Country Head India, Director HSBC Asia Pacific, told media persons here.

In March this year, the RBI has cut CRR, the share of deposits that banks must hold with it, by 75 basis points to 4.75 percent to ease liquidity and infuse Rs.480 billion into the banking system.

Kidwai, however, said the desired effect of the CRR reduction was cancelled out by a substantial amount of cash withdrawal from the system during January-March period.

"Money circulation in the system has more or less been counter balanced by the withdrawal. That in a way cancelled out the potential effect," she added.