RBI Slashed CRR by 1% To Infuse Rs 40000 Liquidity

Author: MP Rana

The Reserve bank of India continuing its move to stabilize the Indian banking system fed another Rs 65000 crore by cutting down the mandatory Cash Reserve Ratio (CRR) for banks by one percent and by disbursement of funds under farm debt waiver scheme. The Central bank also promised to take more such measures if needed.

Banking sector companies said that before initiating a cut in the interest rates they would definitely assess market situation and responses. But Punjab National Bank (PNB), the 2nd largest public sector banking unit, lowered its retail lending rate by 0.5 percent even before the RBI’s reduction in CRR.

In a press release RBI said that it is constantly involved in monitoring the developments in the financial markets very closely and would promptly and preemptively responds to any unpleasant condition having an adverse impact on the Indian financial stability.

The cut down in CRR to 6.5 percent will infuse around Rs 40000 crore in the banking system. The CRR was 9 percent at the start of this month. Similar reduction initiated by RBI in the CRR since October 6 has already infused a sum of Rs 60000 crore and with this move the figure has reached the mark of 100000 crore. RBI has already released Rs 20000 crore for helping mutual funds to tackle liquidity crunch and Rs 25000 crore under the debt waiver scheme.