Tuesday, October 30, 2012

RBI eases money supply

The Reserve Bank of India cut cash reserve ratio(CRR) by 25 basis points from 4.5 per cent  to 4.25 per cent which will release some Rs.175 billion into the system for commercial lending with the hope that it will keep inflation under check, while also pushing growth. The CRR is the money against deposits which commercial banks have to retain in the form of liquid assets such as cash.
“The reduction in the cash reserve ration is intended to pre-empt a prospective tightening of liquidity conditions, thereby keeping liquidity comfortable to support growth,” Mr. Subbarao said explaining the decision.

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