Mon Dec 09 14:49:11 UTC 2024: **Reserve Bank of India Cuts Cash Reserve Ratio, Injecting ₹1.16 Lakh Crore into the Banking System**
MUMBAI, INDIA – The Reserve Bank of India (RBI) announced a reduction in the Cash Reserve Ratio (CRR) from 4.50% to 4%, injecting ₹1.16 lakh crore (approximately $14 billion USD) into the banking system. The decision, announced by RBI Governor Shaktikanta Das during Friday’s monetary policy announcement, will be implemented in two phases: a 0.25% reduction starting the week of December 14th and another 0.25% reduction starting the week of December 28th.
The CRR is the percentage of deposits that banks are required to maintain with the RBI. Lowering the CRR frees up funds that banks can then use for lending, potentially stimulating economic activity. The RBI had previously increased the CRR to control inflation and curb excessive lending. This latest reduction marks a reversal of that policy, possibly in response to an unexpected slowdown in GDP growth.
The RBI last reduced the CRR in March 2020 in response to the COVID-19 pandemic, lowering it from 4% to 3% after seven years without change. It was subsequently raised back to 4.5% in May 2022. The current decrease is seen by some analysts as a potential precursor to further interest rate cuts at the next monetary policy meeting. The RBI’s decision is expected to significantly impact credit availability and potentially lower borrowing costs for businesses and consumers.
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