RBI Monetary Policy: MPC Slashes CRR by 50bps at 4%; Markets React Positively
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) slashed the Cash Reserve Ratio (CRR) by 0.5% to 4%. RBI governor Shaktikanta Das announced this decision at his final address of the term.
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) slashed the Cash Reserve Ratio (CRR) by 0.5% to 4%. RBI governor Shaktikanta Das announced this decision at his final address of the term.
He said, “It has been decided to reduce the cash reserve ratio (CRR) of all banks by 50 bps in two equal tranches of 25 bps each to 4% of net demand and time liabilities (NDTL) with effect from the fortnight beginning December 14, 2024 and December 28, 2024, respectively. This will restore the CRR to 4% of NDTL, which was prevailing before the commencement of the policy tightening cycle in April 2022. This reduction in the CRR would release primary liquidity of about Rs 1.16 lakh crore to the banking to the banking system.”
Banks are mandated to keep a certain percentage of their deposits as CRR with RBI. This will ensure liquidity into the system, as banks can provide additional funds for lending purposes.
Equity markets reacted positively to the decision as bank and financial stocks surged. Nifty Bank increased by 0.13% or 69 points at 53,672.75 at 10:35 am compared to previous day’s low of 53,160.65. Meanwhile, Nifty PSU Bank surged 1% among which Canara Bank, Union Bank, and Bank of Baroda (BoB) were the top gainers.
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