In a bid to control inflation, RBI raised CRR to 8% from 7.50%. This would be done in two stages, first 25bps to be raised effective from April 26 and second would be effective from May 10.
In a statement, the Reserve Bank of India said, “On a review of current liquidity situation, it is considered desirable to increase the cash reserve ratio (CRR) of the scheduled commercial banks, regional rural banks (RRBs), scheduled state co-operative banks and scheduled primary (urban) co-operative banks by 50 basis points to 8.0 per cent in two stages, effective from specified fortnights: First 25bps to be raised effective from April 26 and second would be effective from May 10. “It may be recalled that in the Third Quarter Review of the Annual Statement of the Monetary Policy for the year 2007-08, the stance of monetary policy was set out. The review had stated that over the period ahead, liquidity management will continue to assume priority in the conduct of monetary policy. It was further stated that the liquidity conditions are being shaped by several underlying factors and their developments have implications for liquidity management going forward and warrant appropriate and timely action, “ according to the statement. “The liquidity adjustment facility (LAF) had been in an injection mode persistently during the second half of March 2008. Subsequently, there was a large turnaround and, an average amount of Rs.40,088 crore was absorbed through the LAF during April 3-17, 2008 as against average daily injection of liquidity of Rs. 27,385 crore during March 17-31, 2008, according to the statement. Year-on-year WPI inflation, which was 3.83 per cent on January 12, 2008, i.e., at the time of the announcement of Third Quarter Review, increased to 7.41 per cent on March 29, 2008 and remained at 7.14 per cent as on April 5, 2008 and its overall impact on inflation expectations requires to be monitored and moderated.
