Inflation rate Amid softening, the Reserve Bank of India (RBI) on Friday reduced the repo rate to 5.5 percent to speed up the domestic economy. The central bank has taken this major step amidst the ongoing uncertainty globally. Earlier, RBI had reduced the repo rate by 0.25 percent in February and then 0.25 percent in April. Apart from this, the Reserve Bank has also cut a large cut of 1 percent in cash reserved ratio (CRR). The Reserve Bank has now reduced CRR from 4.0 percent to 3.0 percent for commercial banks. Due to the reduction of CRR, banks will now have more money to give loans.
What is cash reserve ratio
Cash is a very important link in the reserved ratio i.e. CRR banking system. Under the CRR, all the banks of the country reserves a part of their total deposits, which keeps them safe in the hour of trouble. Earlier, banks had to keep 4 percent of their total deposits in the reserve, but now only 3 percent deposits have to be kept in the reserve. This latest decision of RBI will increase the cash available with the Indian banking system by Rs 2.5 lakh crore.
What did RBI governor Sanjay Malhotra say about inflation
In addition, the Reserve Bank of India has retained the economic growth rate estimate for the financial year 2025-26 at 6.5 percent. In the current financial year, the estimate of retail inflation has been reduced from 4.0 percent to 3.7. That is, the Reserve Bank feels that in the current financial year, retail inflation will fall further, which will give a lot of relief to crores of people. Announcing the decisions of the meeting, RBI Governor Sanjay Malhotra said that despite India’s decline in net foreign investment (FDI), India remains an attractive destination for investment.
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