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RBI lowers daily CRR level for banks to 70 pc

Our Bureau

MUMBAI, Dec. 26

THE Reserve Bank of India today reduced the level of Cash Reserve Ratio (CRR) that banks are required to maintain on a daily basis from 80 per cent to 70 per cent.

The RBI had, in the mid-term review of its monetary and credit policy in October, raised the daily minimum CRR level to 80 per cent saying that banks were actually maintaining CRR balances at levels much higher than that was required. At the time of the review, banks were required to keep the CRR level at a minimum of 50 per cent in the first week and at 65 per cent in the second week.

It had then said that while moving towards a low CRR, it "is necessary that the demand for bank reserves in the inter-bank market is modulated and the volatility in CRR maintenance is minimised."

Today's move by the central bank could be aimed at regulating the demand in the inter-bank call money market. Liquidity in the inter-bank market had become marginally tight in the past week because of lending restrictions and the call rate briefly crossed the six per cent mark. The call rate, which has been at levels close to the RBI repo rate of 5.5 per cent, has shown signs of firming up this week too.

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