In order to release liquidity into the system to support growth and credit lending to productive sectors, the Reserve Bank of India, RBI, has reduced the Cash Reserve Ratio, CRR by 25 basis points from 4.50% to 4.25%. The RBI has said that this cut in CRR will immediately release 17,500 crore rupees in the banking system. The CRR is the amount of money that banks are required to park with RBI.
In a bid to tame inflation, the (RBI) in its second quarter review of monetary policy 2012 – 2013, has decided to keep its key lending and borrowing rates unchanged. The policy Repo rate i.e. the rate at which RBI lends to banks has been kept unchanged at 8%. Consequently, the Reverse Repo Rate ,which is the rate at which RBI borrows money from banks has remained unchanged at 7%.
Governor of RBI, D. Subbarao today said in Mumbai that GDP growth forecast has been reduced from 6.5% from 5.8% as earlier projected. He also said that that inflation is expected to rise in the near term but ease by January 2013. He also said that managing inflationary expectations remains the focus of RBI’s monetary policy.The marginal standing facility rate and the Bank Rate have also been kept unchanged at 9 per cent.