RBI cuts CRR by 50 basis points

It will release Rs 20000 crore into the banking system

The Reserve Bank of India (RBI) today, 6 October 2008, announced a 50 basis points cut in the cash reserve ratio (CRR) to 8.5%, with effective from 11 October 2008. The measure would release Rs 20000 crore into the banking system. CRR is the proportion of deposits banks need to keep with the central bank. RBI said the CRR cut is an ad hoc, temporary measure and it will be reviewed on a continuous basis in the light of the evolving liquidity conditions. RBI said it will give priority to liquidity management over the period ahead given the turbulence in international financial markets. RBI also said the overriding priority for monetary policy is to eschew any further intensification of inflationary pressures and to firmly anchor inflation expectations.