Liquidity worth ₹9.5 lakh cr infused into the banking system since Jan: RBI Guv Sanjay Malhotra

The Reserve Bank of India (RBI) Governor Sanjay Malhotra today said liquidity worth ₹9.5 lakh crore has been pumped into the banking sector since January this year, as an impact of measures taken by the banking regulator.

While announcing a 50-basis point reduction in the repo rate to 5.5% today, the RBI Governor also announced a 100bps reduction in the cash reserve ratio (CRR) to 3% — a move aimed at further liquidity support to the banking system, which will stoke lending and consumption in the economy. Today’s CRR cut will release primary liquidity of ₹2.5 lakh crore to the banking system, said Malhotra. 

“Since January, we have injected a lot of durable liquidity through various means like CRR cuts, open market operations, and buy-sell swaps. A total of ₹9.5 lakh crore of durable liquidity has been injected into the banking system since January. As a result, after remaining in deficit since mid-December, liquidity conditions have transitioned to surplus as of the end of March,” Malhotra said while announcing the monetary policy.

“The comfortable liquidity in banking has further reinforced transmission of policy repo rate cuts to the short-term rates. However, we are yet to see a perceptible transmission, although there are insipient signs of transmission to the credit market. But it is still not perceptible. Although we are aware and need to keep in mind that it does happen with some lag,” Malhotra said.

“The RBI remains committed to providing sufficient liquidity to the banking system. To further provide durable liquidity, it has now been decided to reduce the cash reserve ratio, CRR, by 100 basis points from 4% to 3%,” Malhotra added.

On the modalities of the CRR cut announced today, he said this would be done in a staggered manner, during the course of the year, in four equal tranches of 25 basis points each. “It will come into effect from fortnights beginning September 6, October 4, November 1, and November 29 of this year. The cut in CRR will release primary liquidity of ₹2.5 lakh crore to the banking system by the end of November 2025,” Malhotra said.