Reserve Bank of India cut CRR by 25 basis points to 4.25%

Reserve Bank of India (RBI) cut Cash Reserve Ratio (CRR) by 25 basis points to 4.25 Percent.

The Reserve Bank of India (RBI), India’s central banking institution, announces the decision of rate cut on Tuesday. The RBI left interest rates unchanged but cut the Cash Reserve Ratio (CRR) for banks by 0.25% to 4.25% in its credit policy review and indicated it may ease monetary policy further in the January-March quarter, although inflation remains a near-term concern.

The RBI decision, which comes days after a slew of measures taken by the government to push growth, will release Rs 17,500 crore of primary liquidity into the system.

The liquidity infusion, RBI said, would ensure adequate flow of credit to productive sectors of the economy.

Following the cut, CRR will come down to 4.5% while the repo rate, at which the central bank lends to the banks, would remain unchanged at 8%.

The reverse repo, at which it absorbs excess liquidity through borrowings from banks, remains at 7%.

The central bank lowers GDP growth forecast for 2012-13 to 5.8% from 6.5% projected earlier and ups year-end inflation estimate to 7.5% from 7%.

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