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CRR Cut Debate: Why RBI May Hold Off on Reducing the Ratio

3 April 20251 min read
ECONOMYCRR Cut Debate:Why RBI May HoldOff on Reducingthe Ratio3 April 2025safalsetu.com

Why in the news

With liquidity tight, lenders pressed for a lower cash reserve ratio, but a commentary urged RBI to wait.

Key facts

  • December: CRR already trimmed by 50 basis points.
  • Other steps: bond purchases and FX swaps to inject funds.

Why wait

  • CRR is a long-term tool; OMOs and swaps can be adjusted quickly.
  • Banks can still use RBI’s liquidity window.
  • The RBI surplus transfer to the government will add liquidity when spent.

Exam angle

  • CRR funds earn no interest.
  • Tools named: OMO and FX swaps.

Test yourself

1. By how much did RBI cut the CRR in December, as per this commentary?

The note says CRR was reduced by 50 bps in December.

2. How much money did banks want released through a CRR reduction?

About ₹1.3 lakh crore is held with RBI without interest.

3. Which tool is described as a long-term policy lever, unlike OMOs and FX swaps?

CRR is a long-term tool, whereas OMOs and swaps are adjustable.

This topic is part of Daily Current Affairs 3 April 2025 (23 topics).

All topics of the dayDay quizApril 2025

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