Tuesday, January 29, 2013

RBI cuts Repo Rate and CRR by 25 basis points!

What investors and analysts waited with bated breath for a rate cut by the RBI has eventually ended in the positive. The central bank today, after nine months, lowered its policy repo rate by 25 basis points (bps) to 7.75 percent.

Further easing is possible in the future depending on whether the bulbous fiscal deficit is brought under control by the government's upcoming budget or not. The Indian economy has posted its slowest annual growth in a decade. The rate cut is done to boost a decaying Indian economy towards growth as well as controlling a possible flaring inflation. RBI has been cautious in its approach of not affecting external stability with its policy moves.

What was unexpected from the RBI is its reduction of the cash reserve ratio (CRR) by 25 bps to 4 percent. This move will help infuse into the banking system an extra Rs. 180 billion.

RBI Policy Reviews have always been key to move Indian Stock Market like today.

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