Mumbai, Feb. 24 -- The liquidity crunch menacing the banking system will delay lending rate cuts and slow credit growth, lenders cautioned, calling for fresh measures to transmit lower repo rates to cheaper loans.

Three senior bankers told Mint that a reduction of interest rates would not be immediate because of the paucity of liquidity, at a time when lenders were fearful of losing customers and did not want to lower deposit rates. Among several measures, the regulator on Friday announced a three-year dollar swap of $10 billion, barely a month after a six-month swap of $5 billion. It has also conducted open market operations or OMOs and variable rate repo (VRR) auctions to infuse liquidity.

Despite RBI's moves, liquidity has stayed in ...