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Reserve Bank cuts CRR by 50 basis points, interest rates unchanged


January 24, 2012 - Mumbai

The Reserve Bank of India (RBI) has lowered the Cash Reserve Ratio (CRR) by 50 basis points with effect from January 28, but kept the short-term lending rate unchanged in view of the inflationary concerns.

The cut is expected to inject Rs. 32,000 crore into the system.

RBI Governor D Subbarao, who unveiled the third quarterly monetary policy review, today said: "Based on the current inflation trajectory, including consideration of suppressed inflation, it is premature to begin reducing the policy rate."

"Even as inflation remains elevated, despite moderation, downside risks to growth have increased. The growth-inflation balance of the monetary policy stance has now shifted to growth," he added.

Subbarao further said slippage on fiscal deficit, crude prices and rupee depreciation are key challenges for inflation, which after remaining near double digit for almost two-years, came down to 7.5 percent in December last year.

The CRR has been reduced to 5.5 percent from 6 percent with effect from January 28. The CRR is the amount of deposits the banks are required to keep with RBI in cash.

The short-term lending rate (repo) has been kept unchanged at 8.5 per cent.

ANI

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