RBI cuts CRR by 1% to unlock Rs. 2,50,000 crore (US$ 29.15 billion) to banking system by December

The Reserve Bank of India (RBI) has decided to cut the Cash Reserve Ratio (CRR) by 1%, unlocking Rs. 2,50,000 crore (US$ 29.15 billion) liquidity to the banking system for lending to productive sectors. The reduction will be implemented in four equal tranches of 25 basis points each, ending on November 29, 2025, bringing the CRR down to 3%. This move will allow commercial banks to maintain a lower level of liquid cash with the RBI and have higher funds available for lending. The cut aims to provide durable liquidity, reduce the cost of funding for banks, and help in monetary policy transmission to the credit market. Higher credit flow is expected to boost economic growth, which hit a four-year low of 6.5% in FY25.
RBI Governor Mr. Sanjay Malhotra announced the decision, reiterating the bank's commitment to monitor evolving liquidity and financial market conditions and take further measures as warranted. Since January, a total of Rs. 9,50,000 crore (US$ 110.79 billion) of durable funds has been injected into the banking system, transitioning liquidity conditions from deficit to surplus. However, perceptible transmission in the credit market segment is yet to be seen, though it typically happens with some lag.

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