The RBI ahead of Credit Policy review and Union Budget, cut the Cash Reserve Ratio (CRR) by 75 basis points to 4.75 % effective March 10, 2012. The CRR stood at 5.5% earlier. The CRR cut will inject Rs 48,000 crore of liquidity into the banking system. CRR cut will ensure smooth flow of credit.
CRR has been cut to inject permanent primary liquidity into the system. This is the second CRR cut by the central bank this year; it cut the CRR by 0.50 % in its third quarter review in January 2012. In order to mitigate tight liquidity conditions, the cash reserve ratio was reduced by 50 basis points in the Third Quarter Review (TQR) of January 2012.
In spite of these measures, the liquidity deficit has remained large on account of both structural and frictional factors. Further, the liquidity deficit is expected to increase significantly during the second week of March due to advance tax outflows and the usual front loading of cash balances by banks with the Reserve Bank. The Reserve Bank will provide its assessment of the macro-economic situation in its Mid-Quarter Review to be published on March 15, 2012.

thanx again