Infusion of money into the banking system

With a view to mitigate the impact of the global economic recession on the Indian economy, the Reserve Bank of India (RBI) initiated measures, which included reduction in the Cash Reserve Ratio (CRR) from 9 per cent of Net Demand and Time Liabilities (NDTL) to 5 per cent in a phased manner. Besides, the Statutory Liquidity Ratio (SLR) was also reduced by 1 per cent of NDTL from 25 per cent to 24 per cent. In addition successive reductions in repo and reverse repo rates were announced to provide for liquidity in the monetary system. Some other facilities were also initiated to augment liquidity and to ensure that credit continues to flow to the productive sectors of the economy.            

As per the RBI, the measures have resulted in augmentation of actual/potential liquidity in the banking system of about Rs.4.49 lakh crore (from mid September 2008 till June 2009); in addition, the permanent reduction in the SLR by 1.0 per cent of the NDTL has made available liquid funds of the order of Rs.40,000 crore for the purpose of credit expansion.

The details are given below:   Table: Actual/Potential Release of Primary Liquidity - since Mid September 2008 till June 2009     Measures/Facility Amount (Rs.crore) 1. CRR Reduction 1,60,000 2. Unwinding/Buyback/De-sequestering of Market Stabilisation Scheme securities 1,54,927 3. Term Repo Facility 60,000 4. Increase in Export Credit Refinance 35,434 5. Special Refinance facility for Scheduled Commercial Banks (Non Regional Rural Banks) 38,429     Total (1 to 5) 4,48,790     Memo: Statutory Liquidity Ratio (SLR) reduction 40,000 Source: RBI                  

 This information was given by Minister of State for Finance, Shri Namo Narain Meena   in reply to a question raised by Shri Shivanand Tiwari and Shri Raj Mohinder Singh Majitha in Rajya Sabha today.