RBI cuts CRR by 50 bps
24.1.2012 (UNI) The Reserve Bank of India, in its third quarter review of the Monetary Policy, today cut the cash reserve ratio (CRR) by 50 bps with effect from January 28 to ease tight liquidity pressure on the banking system but kept Repo and Reverse Repo Rates unchanged at 8.5 per cent and 7.5 per cent respectively, despite mounting anxiety over slowdown in growth.
The cash reserve ratio, the proportion of deposits that banks have to hold with the RBI, is a popular instrument to inject cash into the system. It now stands at 5.5 per cent.
Banks are borrowing more than Rs 1.2 lakh crore from the RBI, which is double of what the central bank has said it is comfortable with.
The apex bank had earlier hiked rates 13 times since March 2010, the most aggressive pace of monetary tightening among its global peers, to deal with the persistently high inflation, including rising prices of food items.
The RBI left interest rates unchanged in December. UNI