RBI cuts CRR by 50 bps to 8.5%, effective October 11

The RBI on Monday slashed by 0.50 per cent the rate of mandatory deposits that banks need to keep with it to ease the tight liquidity position, a move that may induce banks to lower commercial lending rates.

The new Cash Reserve Ratio (CRR) of 8.5 per cent will be effective from October 11 and would unlock about Rs 20,000 crore into the banking system, RBI said.

This is the first time in almost three years that the bank has relaxed its tight monetary policy stance that it had adopted to contain inflation.

The move, which comes in the backdrop of inflation easing below 12 per cent and outflow of foreign capital, is aimed at infusing more funds in the financial system.