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RBI hikes CRR by 0.5 % to curb inflation
Friday, April 18, 2008
The Reserve Bank on Thursday hiked Cash Reserve Ratio (CRR),
the amount of depositors` money that banks need to park with
it, by half a per cent to tighten money supply, as part of
concerted efforts with the government to ease inflation.
The hike, which would take CRR to 8 per cent, will come into
effect in two tranches of 0.25 per cent on April 26 and May
10, the Central Bank said in a statement here.
The unscheduled hike comes ahead of RBI`s annual credit policy
for 2008-09 to be unveiled on April 29.
The measure would suck out liquidity to the tune of Rs 18,500
crore from the banking system and would leave banks with less
money to lend and in turn would help cool inflation that is at
a three-year high of 7.14 per cent.
"In the light of the current macro-economic, monetary and
anticipated liquidity conditions, and with a view to
containing inflation expectations, it is essential to take
appropriate action on an urgent basis," RBI said in a
statement.
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