The Reserve Bank of India (RBI) is likely to reduce or even scrap altogether interest paid on cash reserve ratio (CRR) of banks, reports quoting official sources said. This is expected to result in a Rs2,000-crore loss to the public sector banks.

The decision, taken to curb inflationary trends in the economy amidst slackening FII inflows and rising interest rates abroad, follows last month's amendment to the RBI Act.

Banks were earning interest of 3.5 per cent on their cash reserve over the stipulated three per cent base up to five per cent. The amended Act abolishes the three per cent floor for CRR.

The RBI Act amendment enables the central bank to fix the mandatory level of CRR against the previous band of 3 per cent to 20 per cent. The finance ministry has also asked the banking industry to improve performance amidst an influx of foreign banks to the country.

Market also expects a hike in interest rates in the coming credit policy, although analysts are not sure of the extent and timing of the rate hike.

RBI, meanwhile, has directed a leading internet-based financial service provider to stop operating "electronic purse schemes". An electronic purse scheme asks individuals to open accounts and fund them by transferring money from their bank or credit card accounts.

In a notification, RBI has also asked banks to dissociate themselves from electronic purse schemes. The central bank has, however, not named the entity, which operates electronic purse schemes for various services, including airline and hotel bookings.

The firm under the RBI scanner, sources say, is a financial services portal which opens accounts for users to shop online, send money to relatives and friends and pay utility bills online.

The portal advises users to add money in case the account balance falls short at any point. But, for this, one needs to submit the PAN number. Money is added to the account via internet banking or using credit cards. The customer needs to ensure that his bank account has been activated for third party transfers.

RBI said electronic purse activities were in the nature of acceptance of deposits, which could be withdrawn on demand.

The act of accepting deposits repayable on demand violates the provisions of the Reserve Bank of India Act governing registration of NBFCs and acceptance of deposits.