New Delhi: The Reserve Bank of India again hiked the cash reserve ratio (CRR) by 0.5 per cent in two stages, which is expected to suck out Rs 14,000 crore from the banking system.
The first hike will be applicable from February - 5.75 per cent on February 15 and 6 per cent in March. All of this is to curtail rising inflation that has recently hit a two-year high over 6.5 per cent.
The Bill, which was passed by a voice vote, would facilitate the removal of existing ceilings or floors on the CRR and SLR.
While CRR refers to the minimum amount that commercial banks must keep as cash reserves, SLR specifies the minimum amount that banks must invest in government securities.
The CRR hike means banks will have less money to lend money available for loans will come down.
It may mentioned that inflation as per latest figures had spiraled to 6.58 per cent and Finance Minister P Chidambaram had expressed concern over rising price line, while maintaining that the government was determined to tackle it.
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