RBI cuts key rates to stimulate economy
RBI cut the repo rate to 5.5% from 6.5%. The reverse repo rate was cut to to 4% from 5%. What is Cash Reserve Ratio? | CRR: From 15.00 in 1992 to 5.5 in 2009
By Agencies |
MUMBAI: The Reserve Bank of India on Friday cut key policy rates. The repo and the reserve repo rate under the liquidity adjustment facility (LAF) has been cut by 100 basis points while cash reserve ratio (CRR) has been reduced by 50 bps.
Following this move, reverse repo stands at 4%, repo stands at 5.5% and CRR now stands at 5%. The cut in CRR will infuse Rs 20,000 crore in the system.
The market had widely expected RBI to cut the key lending rates. The cut in repo and reserve repo is with immediate effect while CRR cut will be effective from fortnight beginning January 17. Since August RBI cut CRR by 450 basis.
Repo rate is the rate at which banks borrow from RBI while the reverse repo is the rate which RBI gives banks for parking their surplus funds. These two rates are seen as the floor and the cap for daily call money movement.
The decisions would among other things infuse Rs 20,000 crore into the banking system.
Both reductions are effective immediately. The repo rate has been cut aggressively since mid-October last year as the central bank tried to minimise the knock-on effects of the global financial crisis.
Following this move, reverse repo stands at 4%, repo stands at 5.5% and CRR now stands at 5%. The cut in CRR will infuse Rs 20,000 crore in the system.
The market had widely expected RBI to cut the key lending rates. The cut in repo and reserve repo is with immediate effect while CRR cut will be effective from fortnight beginning January 17. Since August RBI cut CRR by 450 basis.
Repo rate is the rate at which banks borrow from RBI while the reverse repo is the rate which RBI gives banks for parking their surplus funds. These two rates are seen as the floor and the cap for daily call money movement.
The decisions would among other things infuse Rs 20,000 crore into the banking system.
Both reductions are effective immediately. The repo rate has been cut aggressively since mid-October last year as the central bank tried to minimise the knock-on effects of the global financial crisis.
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