RBI cuts CRR by 100bps, repo rate by 50bps

After infusing Rs 1,85,000-cr liquidity into the banking system, the RBI today effected yet another 100 basis points cut in cash reserve ratio (CRR) and a 0.5 % reduction in key short-term lending (repo) rate, signaling softening of interest rates to prop up growth.     

The one percentage point cut in CRR, the amount which banks have to park with the apex bank, has been brought down to 5.5% to infuse additional liquidity of Rs 40,000 cr into the system.     

The CRR cut will be in two tranches and the first one of 0.5% will be effective retrospectively from October 25 and the second from November 8.     

The RBI also cut the repo rate, the rate at which it lends to banks, by 0.5 per cent to 7.5% with effect from November 3.     

The central bank has also reduced the statutory liquidity ratio (SLR), the amount which banks are mandated to park in government securities, by 100 basis points to 24%.     

Welcoming the decision, ICICI Bank Joint Managing Director Chanda Kochhar said, "it will release much needed liquidity into the system and signal reduction in interest rates."