Friday, the Reserve Bank of India reduced the Cash Reserve Ratio or CRR by 150 basis points to 7.5%, with effect from the fortnight beginning October 11 instead of the 50 basis points reduction announced on October 6, which was the first reduction in CRR in at least five years.
The central bank stated reduction in the CRR would add 600 billion rupees or $12.2 billion into the financial system.
The central bank assured market participants that it is prepared to respond swiftly to meet any liquidity requirements that may arise in the context of the highly volatile external situation.
In a statement, the Indian central bank said, "The Reserve Bank is monitoring developments closely and continuously and would respond swiftly and even preemptively to any adverse external developments impinging on domestic financial stability, price stability and inflation expectations and the continuation of the growth momentum of the Indian economy."
Further, the RBI said it is committed to maintaining financial stability and active and flexible liquidity management using all policy instruments is an integral part of this objective.
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