The Reserve Bank of India (RBI) announced a staggered 100 bps reduction in the Cash Reserve Ratio (CRR), set to release approximately Rs 2.5 lakh crore of primary liquidity into the banking system by December 2025. The announcement, made by RBI Governor Sanjay Malhotra during his post-policy statement, signals the central bank’s intent to ease funding costs and accelerate monetary transmission amid a benign inflation outlook and stable financial environment.
This reduction will be carried out in four equal tranches of 25 bps each with effect from the fortnights beginning September 6, October 4, November 1 and November 29.
Financial system remains robust
The system-level financial parameters of Scheduled Commercial Banks (SCBs) continue to be robust. The asset quality parameters, liquidity buffers and profitability parameters have shown further improvement. Credit Deposit ratio for the banking system at the end of December 2024 was at 81.84 per cent, broadly similar to a year ago. Similarly, the system-level parameters of NBFCs are also sound with comfortable capital position and improved GNPA ratios, the Governor stated.
The stress witnessed earlier in retail segments like unsecured personal loans and credit card receivables portfolio has abated, while the stress in the microfinance segment is persisting. Banks and NBFCs active in these segments are already recalibrating their business models, strengthening their credit underwriting practices and stepping up their collection efforts to avoid any excessive build-up of risks on this front in future.