CRR Rate in India

What is CRR Rate:


Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks.

The cash reserve ratio and statutory liquidity ratio determines the amounts banks have to retain in liquid assets, gold and government bonds against deposits, and form a part of traditional instruments that help in checking liquidity in the system.

RBI may not cut rates in policy review: Finmin

The Reserve Bank of India (RBI) may not go in for key policy rate cuts in its quarterly policy review slated for January 23, said a senior finance ministry official.

"We don't expect rate cuts by the RBI," the offical said, adding the repo and reverse repo rates (short-term lending and borrowing rates) and policy ratios like the cash reserve ratio (CRR) are likely to be retained at the existing level.

The RBI is slated to announce a review of monetary policy on January 23 after taking into account the latest developments in international and domestic markets.

The central bank on January 4 reduced the repo rate (at which banks borrow from the RBI) by 100 basis points to 5.5 per cent, the reverse repo rate (at which the RBI pays to banks) by 100 basis points to 4 per cent, and the CRR (the amount banks are required to park with the RBI) from 5.50 per cent to 5 per cent.

These monetary steps were aimed at injecting more funds into the system and signalling a softer interest rate regime to boost economic growth.

The RBI has been reducing key policy rates since October to neutralise the impact of the global financial meltdown on the Indian economy.

While the repo rate and the CRR were at nine per cent in October, the reverse repo rate was at 6 per cent.

Bankers and analysts, however, have been expecting further cuts in key policy rates by the RBI in its January review as inflation has come down to 5.24 per cent from a peak of 12.91 per cent in August last year.

Soruce: http://www.business-standard.com/india/