Reserve Bank of India (RBI) keeps the interest rates unchanged today on January Credit policy but it has cut CRR (cash reserve ratio) by 50 bps (basis points), this will infuse liquidity in the banking system also this has indicated that RBI has shifted its policy for talking inflation to pumping growth. Today’s cut has lowered the CRR to 5.50% from previous 6.00 % and this will result in pumping Rupees 320 billion of liquidity into the banking system. RBI has also signaled that lowering the interest rates may be considered in future.
Negative outlook is, RBI has also lowered its GDP growth forecast for the FY11 to just 7 % from its previous target of 7.6 percent, last year Indian economy has grown by 8.5%. Also no change in wholesale price index (WPI) inflation at 7% for FY11-12. Moreover risks of inflation is getting high as global crude oil prices are moving higher.