This is with reference to the editorial ‘‘Worth the gamble’’ (Business Line, September 18). The Reserve Bank of India, in its mid quarter review, took the bold step of reducing the cash reserve ratio (CRR) by 25 basis points to 4.50 cent, which will, in turn inject Rs 17,000 crore into the banking system.
This move will certainly strengthen the financial base of banks, enabling them to lend more to companies, especially to individuals. Lending by banks for purchasing consumer durables at cheaper rate will be welcomed by the individuals during the ensuing festivals.
This is, undoubtedly, a welcome move in the present economic situation to contain fiscal deficit and increase growth rate.
Again, the repo rate has been untouched; this will also not overburden the banks in borrowing from the RBI at 8 per cent rate as usual.
The latest decision by the central bank appears to be in consistent with the reform measures announced by the Government in reviving the economy.
Further, in view of the prevailing inflation, the central bank has not reduced interest rates in the larger interest of aam aadmi and senior citizens.
Money parked by them in the banks on a long-term basis will fetch good interest.
Keywords: CRR cut by 25 basis points