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The Reserve Bank of India's (RBI) while announcing its fifth bi-monthly monetary policy of FY25, today, December 6 decided to keep the benchmark repo rate unchanged at 6.5% for the eleventh straight meeting, and maintain the monetary policy stance 'Neutral'. The central bank, however, slashed the Cash Reserve Ratio (CRR) by 50 basis points (bps) to 4%. RBI in its adjoining statement said that even as liquidity in the banking system remains adequate, systemic liquidity may tighten in the coming months due to tax outflows, increase in currency in circulation and volatility in capital flows. To ease the potential liquidity stress, it has now been decided to reduce the cash reserve ratio (CRR) of all banks to 4.0% of net demand and time liabilities (NDTL) in two equal tranches of 25 bps each with effect from the fortnight beginning December 14, 2024 and December 28, 2024, RBI said. This will restore the CRR to 4.0% of NDTL, which was prevailing before the commencement of the policy tightening cycle in April 2022. This reduction in the CRR is consistent with the neutral policy stance and would release primary liquidity of about ₹ 1.16 lakh crore to the banking system, the central bank noted.
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