To ease liquidity situation, the Reserve Bank today slashed CRR -- the portion of deposits banks are required to keep with the central bank -- by 0.75 percentage points, a step that will infuse Rs 48,000 crore (Rs 480 billion) into the economy.
"This reduction (in CRR from 5.5 per cent to 4.75 per cent) will inject around Rs 48,000 crore of primary liquidity into the banking system," the Reserve Bank of India (RBI) said in a statement.
The reduction in cash reserve ratio (CRR) will come into effect from tomorrow, 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 March 15 and is estimated to drain out Rs 60,000 crore from the system. RBI had last reduced CRR by 0.5 percentage points on January 24 thereby injecting Rs 32,000 crore (Rs 320 billon) into the cash-strapped system.
With the latest decision, the RBI would be injecting around Rs 80,000 crore (Rs 800 billion) into the economy in less than 40 days.
