RBI hikes CRR by 75 basis points

While the RBI has kept key rates unchanged in its latest quarterly monetary review, it has raised CRR by 75 bps

The Reserve Bank of India (RBI) today increased the mandatory cash reserves of banks held by it by 75 basis points in a bid to mop up excess liquidity to combat rising inflation, reports PTI.

This 75-basis point increase in cash reserve ratio (CRR) to 5.75% is expected to suck out at least Rs36,000 crore from the system. The move from the RBI was widely expected, with food inflation rising to 17.40% for the week ended 16 January. The move is to check food inflation spreading to other sectors.

According to RBI estimates, inflation is likely to touch 8.5% by this fiscal-end from over 7% in December. Earlier in October, the apex bank had projected the rate of price rise to be at 6.5% by March-end.

However, short-term lending and borrowing rates (repo and reverse-repo) between RBI and banks were kept unchanged, leading to speculation that banks\\\' commercial lending rates may not change.

Central Bank of India executive director Arun Kaul told reporters that the CRR hike is more than market expectations and that liquidity would definitely go down and may have some impact on interest rates.

The apex bank also raised its economic growth projection to 7.5% from its earlier estimate of 6% for the current fiscal.

  • Like this story? Get our top stories by email.


    We are listening!

    Solve the equation and enter in the Captcha field.

    To continue

    Sign Up or Sign In


    To continue

    Sign Up or Sign In



    online financial advisory
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    28 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 4 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)