India Cuts Bank Cash Reserve Ratios
Date: 24 January 2012
Source: RBI
The Reserve Bank of India (RBI) has cut the cash reserve ratio for Indian banks from 6.0 percent to 5.5 percent, effective from 28 January. The RBI has said that this reduction should yield Rs.320 billion of liquidity into the banking system. The Bank had raised the rate by 100 basis points between January 2010 and October 2011, but it noted that growth is decelerating, and that liquidity is tight “beyond the comfort zone of the Reserve Bank,” potentially restricting the flow of credit to the rest of the economy. The move is consistent with broader emerging market fears about the slowing pace of growth, and is indicative of their growth-oriented policy stance (click here to view the ICFR 2012 Regulatory Outlook). Interest rates remain unchanged, with the Bank noting that upside risks to inflation remain.