The Reserve Bank of India (RBI) has upped the Cash Reserve Ratio (CRR) by 50 basis points. The CRR now stands at 6%. This move by the RBI is said to drain liquidity to the tune of Rs. 14,000 crores from the system. The CRR rate hike will have it effect on banks in that many would be forced to hike interest rates. The CRR rate hike has been effected in two stages. The first hike of 25 basis points will be effective from February 17 and the second from March 3. The RBI’s move of hiking the CRR rate is aimed at checking liquidity from further compounding the inflation rate and follows a fortnight after the central bank raised its overnight lending (repo) rate to 7.5% on January 31.
Read more in the article in Business Standard.
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