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In order to improve liquidity condition in Indian market the Reserve Bank of India (RBI) has reduced cash reserve ratio (CRR) by 100 basis points. As per the new move, the banking system of the country will get about Rs 60,000 crore compared to earlier amount of Rs 20,000 crore. In a statement, the RBI said that the cut in CRR will enable to inject liquidity into the ailing financial market of the country. The international stock markets and money markets are under tremendous pressure owing to global financial crisis. The central banks of almost all the countries are taking the requisite steps to counter the crisis.
The CRR cuts will be applicable from October 11, 2008. The auction of government's bonds of 1000 crore has also been put off by the RBI. A few days back RBI has also released Rs 8000 crore to contain inflation under its program called Market Stabilization Scheme (MSS). Although is trying out all possible steps for maintaining financial stability and flexible liquidity management, but the condition of the money market is in a precarious state. Including the earlier 0.5 per cent reduction, a total of 1.5 per cent cut in CRR to 7.50 per cent has been announced by RBI up till now.
