RBI Governor Shaktikanta Das on Friday announced a reduction in the Cash Reserve Ratio (CRR) of all banks by 100 basis points to 3% of Net Demand and Time Liabilities with effect from the fortnight beginning March 28 for a period of 1 year. Das said that macroeconomic fundamentals are stronger than those in the aftermath of the 2008 financial market crisis adding that the banking system in India is safe, deposits are safe in private banks, therefore, the public should not resort to panic withdrawal. He added that living in an extraordinary situation, war effort needs to be mounted against coronavirus using conventional, unconventional tools.
Cash Reserve Ratio reduced to 3 per cent from 4 per cent
Further, RBI Governor announced a reduction in cash reserve ratio (CRR) of all banks by 100 bps to 3 per cent from 4 per cent, with effect from March 28 for one year. This is expected to release Rs 1.37 lakh crore liquidity in the market, he said.
What is Cash Reserve Ratio (CRR)?
CRR is the percentage of deposits that banks have to mandatorily keep with the central bank. RBI last reduced CRR on February, 2013, by 25 basis points. In all, Rs 3.74 lakh crore liquidity to be injected into system through the measures announced today (Friday), he added. The governor also assured the public that the banking system in India was safe.