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May 20, 1998

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RBI move brings down CRR rate

By a Special Correspondent

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The Reserve Bank of India's decision to pump Rs 25.68 billion into the banking system virtually brings down the credit reserve ratio by 0.5 per cent.

The decision comes less than a month after RBI Governor Bimal Jalan refused to increase the CRR ratio due to the comfortable liquidity position. ''So far as the CRR is concerned there will be no change at this point of time as the liquidity condition is quiet comfortable,'' he had said while announcing the slack season credit policy.

The amount, to be released in 12 instalments before March 1999, was impounded during 1991 as incremental cash reserve ratio.

Besides improving the liquidity position, the measure, announced through an RBI circular on Monday, is likely to ease the apex bank's interest burden. For, it has been paying 4 per cent interest on CRR balances to banks.

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