Reserve Bank on Friday (June 6, 2025) determined to reduce Cash Reserve Ratio (CRR) by a enormous 1%, which can unlock ₹2.5 lakh crore liquidity to the banking system for lending to productive sectors of the economic system.
With the discount in 4 equal tranches ending November 29, 2025, the CRR would come down to 3%. This implies that the industrial banks would have to preserve a decrease stage of three per cent in liquid money kind with the RBI permitting them to have larger funds for lending.
“The Reserve Bank remains committed to provide sufficient liquidity to the banking system. To further provide durable liquidity, it has been decided to reduce the cash reserve ratio (CRR) by 100 basis points (bps) to 3 per cent of net demand and time liabilities (NDTL) in a staggered manner during the course of the year,” RBI Governor Sanjay Malhotra stated, whereas asserting the bi-monthly MPC consequence.
Also learn: RBI repo reduce: Industry reactions
This discount might be carried out in 4 equal tranches of 25 bps every with impact from the fortnights starting September 6, October 4, November 1 and November 29, 2025, he stated.
“The cut in CRR would release primary liquidity of about ₹2.5 lakh crore to the banking system by December 2025. Besides providing durable liquidity, it will reduce the cost of funding of the banks, thereby helping in monetary policy transmission to the credit market,” he stated.
Higher credit score circulation will assist in boosting financial development which hit a four-year low of 6.5% in FY’25.
“I would like to reiterate that we will continue to monitor the evolving liquidity and financial market conditions and proactively take further measures, as warranted,” he stated.
RBI had final slashed CRR by 50 foundation factors to 4% within the December 2024 MPC announcement. It was completed in two equal tranches of 25 foundation factors, every with impact from the fortnight starting December 14, 2024 and December 28, 2024.
The transfer led to the unlocking of Rs 1.16 lakh crore to the banking system and easing the liquidity state of affairs.
The RBI on May 4, 2022 had raised CRR to 4.5% from 4% in an off-cycle Monetary Policy Committee (MPC) assembly, with impact from May 21 the identical yr.
RBI, nevertheless, didn’t tinker with Statutory Liquidity Ratio (SLR) and maintained it at 18 per cent.
SLR is a regulatory requirement that requires banks to maintain 18 per cent of whole deposits or web demand and time liabilities (NDTL) in authorities securities. This ensures that banks have ample liquidity to meet buyer withdrawal calls for and preserve monetary stability.
On the liquidity state of affairs, Malhotra stated, a whole quantity of Rs 9.5 lakh crore of sturdy funds has been injected into the banking system since January.
As a consequence, after remaining in deficit since mid-December, liquidity circumstances transitioned to surplus on the finish of March.
This can also be evident from the tepid response to every day Variable Repo Rate (VRR) auctions and excessive Standing Deposit Facility (SDF) balances – the common every day steadiness throughout April-May amounted to ₹2 lakh crore.
Reflecting the advance in liquidity circumstances, the weighted common name charge (WACR) – the working goal of financial coverage – traded on the decrease finish of the LAF hall because the final coverage, he stated.
The snug liquidity surplus within the banking system has additional strengthened transmission of coverage repo charge cuts to quick time period charges, he stated.
“However, we are yet to see a perceptible transmission in the credit market segment, though we must keep in mind that it happens with some lag,” he stated.
Published – June 06, 2025 11:59 am IST
