RBI cuts CRR by 0.75 percentage points; to infuse Rs48,000 crore

The 0.75% reduction in CRR is aimed at reducing the liquidity deficit (which) is expected to increase significantly during the second week of March on account of to advance tax outflows and the usual frontloading of cash balances by banks with the RBI

Mumbai: To ease liquidity situation, the Reserve Bank of India (RBI) today slashed the cash reserve ratio (CRR)—the portion of deposits banks are required to keep with the central bank—by 0.75 percentage points, a step that will infuse Rs48,000 crore into the economy, reports PTI.

“This reduction (in CRR from 5.5% to 4.75%) will inject around Rs48,000 crore of primary liquidity into the banking system,” the RBI said in a statement.

The reduction in the CRR will come into effect from Saturday, it said, adding that the measure is aimed at reducing “the liquidity deficit (which) is expected to increase significantly during the second week of March on account of to advance tax outflows and the usual frontloading of cash balances by banks with the Reserve Bank.”

The last date for advance tax payment in 15th March and is estimated to drain out Rs60,000 crore from the system.

RBI had last reduced CRR by 0.5 percentage points on 24th January thereby injecting Rs32,000 crore into the cash-strapped system.

With the latest decision, the RBI would be injecting around Rs80,000 crore into the economy in less than 40 days.

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