RBI cuts banks’ CRR by 75 bps to 4.75 per cent

The Reserve Bank of India (RBI) today announced a reduction in cash reserve ratio for banks by 75 basis points to 4.75 per cent from 5.5 per cent, effective Saturday, in a bid to further ease liquidity conditions in the banking system.

The cash reserve ratio (CRR) or the amount of cash that scheduled banks have to set aside as a reserve has been reduced from 5.5 per cent to 4.75 per cent of their net demand and time liabilities (NDTL) effective the fortnight beginning 10 March 2012, RBI said in a release.

This reduction will inject around Rs48,000 crore of cash or primary liquidity into the banking system, RBI said in its release.

RBI had, in its third quarter monetary policy review in January, reduced the cash reserve ratio for banks by 50 basis points, injecting primary liquidity of Rs31,500 crore into the banking system. The RBI has also injected another Rs1,24,500 crore into the system through open market operations (OMOs), so far this financial year.

Of this Rs52,800 crore was injected after the third quarter review in January, RBI noted.

Despite these measures, RBI said, the liquidity deficit has remained large on account of both structural and "frictional" factors.