With the liquidity situation becoming tighter and inflation on the decline, the financial markets are expecting a reduction in the cash reserve ratio (CRR) — portion of bank deposits kept with the RBI — by the Reserve Bank of India to ease the money crunch in the banking system. The CRR has been left unchanged at 6 per cent since May 2010. However, the policy rates have been raised 13 times during the same period with the central bank last raising the repo rate by 25 basis points to 8.50 per cent in October 2011. As the last date for payment of advance tax is due on December 15, pressure is mounting on the RBI to cut CRR by 25-50 basis points in its mid-quarter monetary policy review on December 16. In a bid to tide over the tight liquidity situation, the RBI on Monday announced that it will purchase government securities worth Rs 10,000 crore on Thursday through Open Market Operations (OMO).
Source : Indian Express
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