Click to play videoNew Delhi: The Reserve Bank of India (RBI) tries to and continues to be the bank that never sleeps.
Realising that extraordinary times require extraordinary measures, the RBI has cut the Cash Reserve Ratio (CRR) by a percentage point.
CRR is the percentage of money that a bank needs to park with the country’s prime bank at all times.
The latest CRR cut is the third in two weeks and will infuse an additional Rupees 40,000 crore into the banking system.
“Short term rates will definitely cool down. It is not the time to tinker deposit, lending rates as of now,” said ICICI Bank’s Chanda Kochchar.
Interest rates on non-resident deposit schemes have been hiked by half a percentage point. The government will also release the first installment of the agricultural loan waiver to banks, which is Rupees 25,000 crore.
“The government had agreed to provide to the commercial banks, to the RRBs and to the cooperative credit institutions, a sum of Rupees 25000 crore as a first installment. It is felt that this money should be provided immediately, hence at the request of the government, the RBI has agreed to provide a sum of Rupees 25000 crore to the lending institutions immediately,” said Union Finance Minister P Chidambaram.
With the two earlier cuts, the cash infusion by the RBI into the system through CRR cuts now stands at a total 1,00,000 crore.
Experts say that they also expect SLR cut and increase in ECB borrowing to be in the pipeline. A repo rate cut is also not ruled out. Experts also feel that the next few days will tell us whether these measures will work.
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