No respite for borrowers; RBI cuts CRR by 0.25%
Mumbai: Acting cautiously, the Reserve Bank on Tuesday slashed the Cash Reserve Ratio (CRR) by 0.25 percent – the percentage of deposits banks keep with central bank – but refrained from reducing lending rates in view of high inflation.
Following the cut, CRR will now come down to 4.25 percent while the repo rate, at which the central bank lends to the banks, would remain unchanged at 8 percent.
The reverse repo, at which it absorbs excess liquidity through borrowings from banks, remains at 7 percent.
This reduction (in CRR from 4.5 percent to 4.25 percent) will inject around Rs.17,500 crore of primary liquidity into the banking system.
After announcing the cuts, the RBI said that government’s reform efforts are in the right path but added that immediate implementation and continued measures are needed to bring the economy back to growth path.
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