RBI CRR cut for Rs 48,000 cr, Pranab gets elbow room | india | Hindustan Times
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RBI CRR cut for Rs 48,000 cr, Pranab gets elbow room

The Reserve Bank of India (RBI) on Friday announced to cut the cash reserve ratio (CRR) — the proportion of deposits banks have to park with the central bank — by 0.75 percentage points in order to ease tight liquidity situation in the banking system. HT reports. Easing liquidity

india Updated: Mar 10, 2012 02:19 IST
HT Correspondent
Reserve Bank of India

The Reserve Bank of India (RBI) on Friday announced to cut the cash reserve ratio (CRR) — the proportion of deposits banks have to park with the central bank — by 0.75 percentage points in order to ease tight liquidity situation in the banking system. Lowering of CRR, from 5.5 % to 4.75%, will inject Rs 48,000 crore into the system.



"The overall (liquidity) deficit in the system persists above the comfort level of the Reserve Bank," said the central bank in the press release. "Accordingly, it has been decided to inject permanent primary liquidity into the system by reducing the CRR so as to ensure smooth flow of credit to productive sectors of the economy." http://www.hindustantimes.com/Images/Popup/2012/3/10_03_biz-05.jpg

The reduction in CRR will come into effect from Saturday. The RBI is scheduled to announce the mid-quarterly review of its monetary policy on March 15, a day before the presentation of the Union Budget.

The RBI in its third quarter monetary policy on January 24 had cut CRR by half a percentage point to 5.5%, releasing Rs 32,000 crore in the system. Despite that the liquidity deficit has remained large on account, which was reflected in the net average borrowing under the RBI’s liquidity adjustment facility (LAF) rising from an average of Rs 129,200 crore in January 2012 to Rs 140,500 crore in February. Net injection of liquidity through LAF rose to a peak of Rs 191,700 crore on March 1, 2012.