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Cash Reserve Ratio (CRR) Might See 1% Cut

As inflation started showing signs of decreasing a lot of changes have taken place in the market. Headline inflation fell to 7.47% in December 2011, from 9.11% in the previous month. This is the lowest inflation value in the past two years according to the report given by Wholesale Price Index (WPI).

Assocham, The Associated Chambers of Commerce and Industry of India has planned to reduce half a percentage points in repo rate (the rate at which the RBI lends short-term money to banks) and at least 1% point reduction in cash reserve ratio (CRR). It is done to both ease the mounting cost of borrowing and lending and to inject liquidity in the banking sector.

Earlier, we had told you that RBI is expected to decrease the CRR (Cash Reserve Ratio) by March. The CRR presently stands at 6% and this 1% point cut in CRR could release Rs.56, 000 crore in the banking sector, said the industry body ahead of RBI’s monetary review which was scheduled on January 24.

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