The Reserve Bank of India (RBI) has decided to reduce the CRR (cash reserve ratio) of all banks by to 4% of net demand and time liabilities (NDTL) in two equal tranches of 25 bps each with effect from the fortnight beginning December 14 and December 28, 2024. This will restore the CRR to its level prevailing before the policy tightening cycle in April 2022.
“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 been decided to reduce the CRR,” stated RBI Governor Shaktikanta Das while announcing the decisions and deliberations of the Monetary Policy Committee (MPC).
The three-day meeting of the MPC concluded with a decision to keep the policy repo rate unchanged at 6.5%. The standing deposit facility (SDF) rate will remain at 6.25%, while the marginal standing facility (MSF) rate will stay at 6.75%.
The MPC unanimously reaffirmed its ‘neutral’ policy stance, emphasising its focus on achieving durable alignment of inflation with the target, while also ensuring support for economic growth.
The CPI inflation for 2024-25 is projected at 4.8%, with Q3 at 5.7%, and Q4 at 4.5%. CPI inflation for Q1:2025-26 is projected at 4.6% and Q2 at 4%.
