RBI cuts CRR by 75 basis points to 4.75 per cent

DSIJ Intelligence / 09 Mar 2012

Reserve Bank of India (RBI) has cut the Cash Reserve Ratio (CRR) by 75 basis points to 4.75 per cent in order to inject around Rs 48000 crore of liquidity into the banking system. 
Reserve Bank of India (RBI) has cut the Cash Reserve Ratio (CRR) by 75 basis points to 4.75 per cent in order to inject around Rs 48000 crore of liquidity into the banking system. This cut will be effective from the fortnight beginning 10th March 2012. 

The chief reason for such a move by RBI can be attributed to the high liquidity pressure faced by banks. It was noted that banks borrowing through the Liquidity Adjustment Facility (LAF) had increased form an average of Rs 129200 crore in January 2012 to Rs 140500 crore in February 2012. After peaking out at Rs 191700 crore on 1st March, it declined to Rs 127300 crore on 7th March 2012. One reason why the LAF borrowing peaked in March could be due to Advance tax Payments made by corporate companies in the first fortnight of March. 

Earlier during the year, the RBI had cut CRR’s by 50 bps to 5.5 per cent during its third quarter monetary policy review on 24th Jan 2012. RBI press release states that, there could be further liquidity deficit seen in the system due to the usual frontloading of cash balances by banks and also due to Advance Tax payments.   

In conclusion, we at DSIJ had anticipated the high chances of a possible cut in CRR’s in our earlier articles. It seems that markets had also expected the same and hence the benchmark SENSEX and NIFTY were up by more than 2 per cent during today’s trading session. 

Going forward, investors and traders would keenly watch the mid quartet monetary policy review by RBI which is expected on 15th March 2012. We believe that RBI may not cut the interest rates on 15th March and one may see the interest rates reversing from FY13 onwards.

If you want to stay updated with the share market news today, keep a close watch on the indian stock market today with real time movements like sensex today live and overall stock market today trends. Investors tracking ipo allotment status, ipo news today, or the latest ipo india can also follow daily updates along with bse share price live data. Whether you are learning how to invest in stock market in india, preparing for a market crash today, or searching for the best stocks to buy in india, insights on top gainers today india, top losers today india, trending stocks india and long term stocks india help in making informed investment decisions.