RBI cuts CRR by 1 percent, releases additional Rs 40,000 cr

New Delhi, Oct 15 : The Reserve Bank of India has further cut by one percent, the amount of mandatory cash that banks need to park with it - a move that would unlock Rs 40,000 crore into the financial system and pave the way for lower lending rates.

This is the third time that the central bank has cut the Cash Reserve Ratio in two weeks, bringing the combined cut to 2.50 percent that released a total of Rs 100,000 crore into the cash-starved banking sector so that they can resume normal lending operations.

With this cut, the CRR would be 6.5 percent as against 9 percent at the start of this month.

RBI has also raised the interest rates ceiling on deposits by non-residents by 50 basis points to attract foreign funds inflow.

Continuing the fight against the ripple effects of the global financial meltdown, Finance Minister P Chidambaram has announced more steps to inject cash into the system and strengthen the banking sector, while doubling FIIs investment limit in the corporate bond market.

ANI