Mumbai, Oct 30 (ANI): The Reserve Bank of India (RBI) on Tuesday left its key policy rate unchanged in its second quarter (July-September) monetary policy.
However, it cut cash reserve ratio by 25 basis points to 4.25 percent. CRR is the portion of deposits banks are mandated to keep with the RBI.
With the CRR cut, the central bank will infuse Rs 17,500 crore liquidity into the system.
Announcing this, RBI Governor D Subbarao said that the CRR cut was necessary to pre-empt a prospective liquidity strain.
He further said: "As inflation eases further, there will be an opportunity for monetary policy to act in conjunction with fiscal and other measures to mitigate the growth risks and take the economy to a sustained higher growth trajectory."
"While risks to this trajectory remain, the baseline scenario suggests a reasonable likelihood of further policy easing in the fourth quarter of 2012-13," he added.
Earlier on Monday, Finance Minister P Chidambaram had unveiled a five-year road map for fiscal consolidation to promote investments, contain inflation and reduce fiscal deficit to about three percent to take India onto the high growth trajectory.
Chidambaram said that the government will continue its efforts to restrict fiscal deficit in the current financial year to 5.3 percent of the Gross Domestic Product (GDP) and reduce it to three percent by 2016-17.
The fiscal deficit was 5.8 percent in 2011-12.
Economic growth slipped to nine-year low of 6.5 percent in 2011-12 and it is expected to fall further this fiscal.
Referring to fiscal consolidation in 2012-13, Chidambaram expressed the confidence that government would be able to raise Rs 30,000 crore from disinvestment and Rs. 40,000 crore from sale of spectrum. (ANI)
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