The Reserve Bank of India (RBI), on Tuesday, reduced the
Cash Reserve Ratio (CRR) i.e. the
portion of deposits that banks keep with the central bank by 25 basis points
from 4.5 per cent to 4.25 per cent. This is expected to release liquidity to
the tune of around Rs. 17,500 crore into the banking system.
The central bank in the mid-quarter review of the monetary
policy, however, kept interest rates unchanged saying inflation remained a big
concern. The RBI kept the repo rate, the rate at which it lends to commercial
banks, unchanged at 8 percent. The reverse repo rate, the rate at which the
apex bank borrows money from commercial banks, is also kept unchanged at 7
percent.
However, the RBI revised downwards the projection of GDP
growth for 2012-13 from 6.5 per cent to 5.8 per cent.
The 25 basis cut in CRR might bring a little relief to the
liquidity situation of banks as the cost of capital which has been hurting the
banks and industries might ease a little.
Since January 2012 when the CRR was 6%, the Reserve Bank has
lowered the rate four times.
