Banks are required to hold 2.5 percent of deposits in non-interest earning accounts with the central bank.

The total value of loans issued by South African banks grew by about 25 percent in each of the past three years.

Christo Luüs, Absa's group chief economist, said increasing the cash reserve requirement ratio might cause disintermediation - companies could source short-term credit from one another rather than go to the banks.

He said the Reserve Bank held R33.8 billion in banks' deposits at the end of September, with the bulk comprising cash reserve requirements.

An increase of 0.5 percent would remove R7 billion that could be available for issuing loans to the public, leading to an annual loss of R800 million for the banks.

Local banks issue loans worth R25 billion a month.

Luüs said variations in the reserve, even if small, would release or bottle up amounts of cash that were disproportionately large in relation to existing shortages of liquidity in the banking system.

Nico Kelder, an economist at Efficient Group, said the cash reserve requirement was not market friendly as it could bring uncertainty.

He added that interest rate adjustment was the best tool as it fitted into the market as a form of pricing credit.

Jac Laubscher, Sanlam's group economist, said South Africa's developed banking system was likely to make such direct interventions ineffective. Banks could circumvent such controls through securitisation - issuing asset-backed bonds - enabling them to free up capital to issue more loans.

This view was echoed in a research note by Investec, which said banks could easily overcome additional capital adequacy requirements by raising more capital.

Investec said any interventions would be premature, particularly before the full effect of the 200 basis points of interest rate increases since last June could be ascertained.

It added that targeting the banks alone would miss a substantial component in the growth of credit extension: retailers.

Laubscher said monetary authorities would have to be patient before contemplating any "Draconian measure" as there was also the National Credit Act, which would be effective from June. The law compels banks to be more stringent in their lending.