RBI eases money supply to push growth | SupportBiz


RBI eases money supply to push growth

The Reserve Bank of India Tuesday cut a key policy rate by 25 basis points to release some Rs.175 billion into the system for commercial lending with the hope that it will keep inflation under check, while also pushing growth.

The cash reserve ratio, or the money against deposits which commercial banks have to retain in the form of liquid assets such as cash, has been cut to 4.25 percent from 4.5 percent at present.

These changes were effected during the second quarter review of the monetary policy for this fiscal conducted by RBI Governor D. Subbarao at the central bank's headquarters at Mint Street in downtown Mumbai.

"The reduction in the cash reserve ration is intended to pre-empt a prospective tightening of liquidity conditions, thereby keeping liquidity comfortable to support growth," Subbarao said, explaining the rationale of policy action Tuesday.

All the other policy rates and reserve ratios were kept unchanged.