RBI Cuts CRR By 1% To Inject Rs 2.5 Lakh Cr Into Banking System By December

(MENAFN- KNN India) New Delhi, Jun 6 (KNN) The Reserve Bank of India (RBI) announced a substantial monetary policy intervention on Friday, with a 1 percent cut in the Cash Reserve Ratio (CRR) to inject Rs 2.5 lakh crore into the banking system.

The CRR reduction will lower the reserve requirement from 4 percent to 3 percent of net demand and time liabilities, implemented through four equal installments of 25 basis points each.

The phased implementation schedule begins September 6, 2025, followed by subsequent reductions on October 4, November 1, and November 29, with full implementation completed by December 2025.

"The Reserve Bank remains committed to provide sufficient liquidity to the banking system. To further provide durable liquidity, it has been decided to reduce the cash reserve ratio (CRR) by 100 Basis Points (bps) to 3 percent of Net Demand and Time Liabilities (NDTL) in a staggered manner during the course of the year," RBI Governor Sanjay Malhotra said.

This measure represents the most significant CRR reduction since March 27, 2020, when the RBI reduced the ratio by 1 percent and the repo rate by 75 basis points in response to the Covid-19 crisis.

"The cut in CRR would release primary liquidity of about Rs 2.5 lakh crore to the banking system by December 2025. Besides providing durable liquidity, it will reduce the cost of funding of the banks, thereby helping in monetary policy transmission to the credit market," the Governor added.

The decision comes as India's economic growth declined to a 4-year low of 6.5 percent in fiscal year 2025, creating pressure for policy measures to stimulate economic activity.

Enhanced credit availability through this liquidity injection aims to support broader economic recovery and growth acceleration.

"I would like to reiterate that we will continue to monitor the evolving liquidity and financial market conditions and proactively take further measures, as warranted," he said.

This action follows a previous CRR reduction of 50 basis points to 4 percent, announced in the December 2024 MPC meeting and implemented in two instalments of 25 basis points each, effective December 14 and December 28, 2024.

This move released Rs 1.16 lakh crore into the banking system, easing liquidity constraints.

However, the RBI kept the Statutory Liquidity Ratio (SLR) unchanged at 18 percent.

Under this requirement, banks must hold 18 percent of their total deposits-or Net Demand and Time Liabilities (NDTL)-in government securities.

The SLR helps ensure that banks maintain sufficient liquidity to meet withdrawal demands and support overall financial stability.

(KNN Bureau)

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