The Reserve Bank of India (RBI) in its quarterly monetary policy review
on Monday announced a 0.25 per cent cut in Cash Reserve Ratio
CRR is the amount of money which banks are required to keep with the central bank in cash.
The central bank's step comes on the back of the government allowing foreign direct investment (FDI) in multi-brand retail and aviation. The government has also hiked diesel prices by Rs 5 per litre on September 13
, along with capping LPG cylinders per family.
RBI has kept the short-term lending and borrowing rates unchanged. The cut in CRR is expected to release about Rs 17,000 crore into the market.
Headline inflation, which rose to 7.55 per cent in August
, failed to deter the central bank's sentiment for growth as it sees the government's recent reform initiatives to favour growth-inflation dynamics.
At 11.35 am, the BSE Sensex was trading at 18,551.48
- up 87.21 points or 0.47 per cent. The 50-share National Stock Exchange Nifty was trading 22.80 points, or 0.41 per cent, higher at 5,600.45.Following are the highlights of the mid-quarter monetary policy review announced by RBI on Monday:
*Cash Reserve Ratio cut by 0.25 per cent at 4.5 per cent
*Repo and reverse repo rates kept unchanged at 8 per cent and 7 per cent
*CRR cut to inject Rs 17,000 crore into banking system
*Government's recent reform initiatives to result in favourable growth-inflation dynamics
*Inflation remains a challenge; growth risks have increased
*Diesel price hike, subsidised LPG cap to put pressure on inflation
*Economic activity in July-September quarter to remain subdued
*Sustainable current account deficit to depend on fiscal consolidation.