After the Reserve Bank of India reduced the CRR (Cash
Reserve Ratio) was by 150 basis points or 1.5% effective October 11,
it has announced another cut of 1%. Now CRR stays at 6.5 per cent. Besides
this, RBI decided to provide Rs. 25,000 crore to banks as the first
instalment under the Agricultural Debt Waiver and Debt Relief scheme
of the Government. RBI has also raised the interest rates ceiling on
non-resident Indian (NRI) deposits. This move is intended to attract
foreign currency funds to the country. Currently, the interest rate
ceiling on FCNR (B) deposits of all maturities has been fixed at Libor
or Euribor or Swap rates for the corresponding maturities minus 25 basis
points for the respective foreign currencies.
The present interest rate ceiling on NR (E) RA for
one to three years maturity should not exceed the Libor or Euribor or
Swap rates plus 50 basis points for the U.S. dollar of corresponding
maturity. Further, banks will be allowed to borrow funds from their
overseas branches and correspondent banks up to a limit of 50 per cent
of their unimpaired Tier I capital as at the close of the previous quarter
or $10 million, whichever is higher, as against the existing limit of
25 per cent. However, the RBI stated that these measures will be reviewed
on a continuous basis in the light of the evolving liquidity conditions.
