The official drive to restore liquidity to the banking system and hence ease the credit crunch gathered momentum on Wednesday with the Reserve Bank of India effectively infusing a further Rs 65,000 crore through cuts in the cash reserve ratio (CRR) and part payment to banks for the farm loan waiver scheme.
With this, the central bank has increased the banks’ lending resources by Rs 1,45,000 crore over the last three days, following earlier cuts in CRR that came into effect on Monday and a Rs 20,000 crore window for banks to borrow from the RBI to lend to mutual funds facing redemption pressure.
The first concrete sign that the moves are beginning to have an impact came in the form of a cut of half a percentage point in interest rates on home and education loans announced by the Punjab National Bank on Wednesday. Some other state-owned banks, which are comfortably placed in terms of liquidity, are likely to follow suit, confirmed a senior official at one of the banks.
