Facts:
• CRR: 6% -> 5.5% (w.e.f. 28-1-2012)
• CRR cut will infuse Rs. 32,000 Cr liquidity in system
• Repo rate: 8.5% (unchanged)
• FY12 Growth projections revised from 7.6% to 7%
• Food inflation has come in control
Current policy stance is the result of contracting growth, fiscal fear and expected easing off of inflation in December.
RBI now identified that even after its anti-inflationary stance of increasing repo rates the inflation has not come in their comfort levels; it has now taken a route of adding liquidity action by cutting down the CRR from 6% to 5.5% as it saw that their prior steps curbed the growth of the country. This was expected and it will bring in good liquidity for banks and in turn in the economy. Some believe that RBI has done this with a view that Banks will be able to meet their Basel III standard’s tier I capital. So, its in favor of Banking sector.
