NEW DELHI: Investors globally pulled out more than $3 billion from equity funds focused on emerging markets including India in a week amid concerns over the US Federal Reserve's plan of curtailing its stimulus drive starting later this year, says a report.

According to funds tracking company EPFR Global, over $3 billion has flown out of emerging markets equity funds during the week ending June 19.

Explaining the outflow, the report said "investors expected the outcome of the US Federal Reserve's latest meeting to be relatively benign".

However, equity funds attracted net inflows to the tune of $4.81 billion during the third week of June.

"While investors are distancing themselves from most of the top tier emerging markets such as China, Brazil, Russia and South Africa, they have retained their appetite for the smaller, riskier, faster growing ones," the report noted.

The US Federal Reserve's decision to curtail its liquidity measures with a goal of ending it in mid-2014 has been weighing on emerging market funds.

The EPFR did not disclose India-specific fund outflow data. But, according to information available with the Securities and Exchange Board of India ( Sebi), the foreign institutional investors (FIIs) pulled out $580 million from the Indian market during the week under review.

Most of emerging market focused equity funds invest in India as FIIs and the capital flows through this route are a key factor in the stock market trends here.

At the country level, Japan equity posted inflows for the straight 21 week, while Germany and Korea also attracted fresh money.

However, equity funds dedicated to China extended their losing run as a report from ratings agency Fitch raised new questions about the country's shadow banking system

MUMBAI: Ahead of the mid-quarter review of monetary policy tomorrow, the State Bank of IndiaBSE 1.31 % (SBI) has said if the apex bank cannot reduce CRR rate, which is a must for lending rate cuts by banks, they should pay interest on cash reserves that banks park with the monetary authority.

Incidentally, most analysts expect the RBI to hold rates during its mid-quarter monetary policy review.

"If a CRR cut cannot be done due to inflation worries, let the RBI pay us interest on CRR. We will then do the transmission for sure. If the RBI pays me Rs 500 crore on interest on my CRR, I promise to transmit the entire Rs 500 crore to borrowers by reducing my base rate," SBIBSE 1.31 % chairman Pratip Chaudhuri told PTI recently.

Last year he had triggered off a heated debate by calling for abolition of CRR. He felt that CRR is "dead money" and it had led to a public spat with K C Chakrabarty, the RBI deputy governor in charge of banking services, who said that if the SBI chairman is not comfortable working under existing regulations, he should look for "some other sector".

Explaining the rationale for SBI's as well as other banks' inability to cut lending rates with minor repo rate cuts that RBI has done by 125 basis points (1.25 per cent) since the middle of the past fiscal, Chaudhuri said, "The relationship between the repurchase rate and the bank lending rate is rather weak. Bank deposits rates are guided by postal deposit rates and not by RBI rates".

Further, he said that a 25 basis points reurchase rate cut will give an additional income of merely Rs 50 crore to the SBI.

"How do I distribute it to my borrowers when my loan book is Rs 7 trillion? Instead, if the RBI reduces CRR by 25 basis points, I get about Rs 3,000 crore. So, if there is a CRR cut, then the transmission is more pronounced," the SBI chairman argued.