RBI Tripal dose for the Baning System

In a welcome and much awaited move RBI has announced major rate cuts in SLR (banks are required to invest a portion of their deposits in government securities as a part of their statutory liquidity ratio (SLR)), CRR (Cash reserve ratio; percentage of amount that banks have to maintain with RBI in the form of cash) and Repo rate (Repurchase rate; rate at which banks borrow funds from the RBI to meet the gap between the demand they are facing for money (loans) and how much they have on hand to lend). SLR and CRR has been cut by 100basis points to 24% and 5.5% respectively where as repo rate by 50 basis points to 7.5%. These cuts will be applicable from the week ended 8th Nov 2008. Due to this cut Banking system will have additional 120,000 crores of additional liquidity to lend and hopefully it will help to reduce the liquidity crunch prevailing in the market. On Friday the call money rate was as high as 22% and this was one of the major reasons to ease the liquidity in the system with these rate cuts.