Mumbai: The Reserve
Bank of India (RBI), in a bid to increase liquidity in the system,
Monday cut by 0.25 percent the cash reserve ratio (CRR), the
proportion of money banks are required to keep with it.
The CRR cut will release Rs.17,000 crore liquidity into the
economy. This will enable banks to cut lending rates.
The central bank in the mid-quarter review of the monetary policy,
however, kept interest rates unchanged saying inflation remained a
The CRR is reduced by 0.25 percent (or 25 basis points) to 4.50
percent. The new CRR rate will be effective from the fortnight
beginning Sep 22, 2012.
The RBI kept the repo rate, the rate at which it lends to
commercial banks, unchanged at 8 percent. The reverse repo rate,
the rate at which the apex bank borrows money from commercial
banks, is also kept unchanged at 7 percent.
In the policy review, the RBI said the main focus of monetary
policy remains fighting inflation.
"As inflationary tendencies have persisted, the primary focus of
monetary policy remains the containment of inflation and anchoring
of inflation expectations," said RBI Governor D Subbarao.
"Containing inflationary pressures and lowering inflation
expectations warrant maintaining the momentum of recent policy
actions to step up investment, alleviate supply constraints, and