The Reserve Bank of India (RBI) finally bit the bullet on Friday and responded to the coronavirus-induced crisis with a whopping 75 basis points cut in the repo rate, bringing it down to 4.4 per cent. The repo rate has thus fallen to the lowest ever. Before this, it had hit the lowest point of 4.74% in April 2009 in the wake of the Global Financial Crisis. The central bank also cut the cash reserve ratio or CRR by 100 basis points to 3 per cent with effect from March 28, unlocking Rs 1.37 lakh crore primary liquidity in the banking system. The reverse repo rate, too, was lowered by 90 basis points. Repo rate is the rate at which the central bank lends money to commercial banks in the event of any shortfall of funds. Monetary authorities use this to control money supply in the economy, thereby inflation. The reverse repo rate is the rate at which RBI borrows funds from commercial banks. It is the rate at which commercial banks in India park their excess money with RBI usually for the short term. CRR or cash reserve ratio is the percentage of total deposits that banks are required… Read full this story
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