In his post Monetary Policy Committee meeting address that was held between December 4 and December 6, the RBI governor announced the cut in Cash Reserve Ratio or CRR to 4 per cent, from the previous 4.5 per cent. The central bank brought in a cut of 50 basis points.
The Cash Reserve Ratio is the rate, as according to which banks in the country are expected to reserve a certain amount of the cash deposits with bank. An increase in CRR means affects the ability of commercial banks to lend, as this reduces the availability of resources for the bank to disperse.
On the contrary, a decline in CRR rate means greater availability of resources for banks to disperse, thereby making them liquid.
(This is a developing story; more details will follow soon.)
