December 6, 2024
New Delhi, India
RBI
The Reserve Bank of India (RBI) on Friday, December 6, announced a 50-basis-point cut in the cash reserve ratio (CRR) to 4% during its monetary policy meeting. The move, aimed at easing liquidity conditions, will be implemented in two phases of 25 basis points each, starting December 14 and December 28.
Liquidity Boost with CRR Cut
RBI Governor Shaktikanta Das stated that the CRR cut would inject ₹1.16 lakh crore into the financial system. The cash reserve ratio, the proportion of deposits banks must hold as cash, now stands at 4%. This infusion is expected to provide relief to the banking sector and support economic activity.
Key Policy Decisions
The RBI Monetary Policy Committee (MPC) decided to keep the repo rate unchanged at 6.5% for the eleventh consecutive time, with a voting ratio of 4:2 in favor. The committee also unanimously opted to maintain a neutral policy stance.
Governor Das cited high inflation as a critical factor behind the decision. Retail inflation surged to 6.21% in October, exceeding the RBI’s tolerance band for the first time in over a year.
Growth and Inflation Outlook
The RBI revised its growth outlook downward while raising its inflation forecast for the fiscal year. India’s GDP growth slowed to 5.4% in the July-September quarter, marking the weakest pace in seven quarters.
Market Reaction
The announcement sparked a recovery in the equity markets. The Sensex and Nifty rebounded from initial losses, with the Nifty 50 trading marginally higher at 24,732.5 and the Sensex at 81,837.15, both up by 0.1%.
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