Today, the central bank, Reserve Bank of India has decreased the cash reserve ratio (CRR) by 0.25% and the new amount has been fetched at 4.25%. This move by Reserve Bank of India to reduce the CRR rate will infuse another Rs 17,500 crores into the banking system.
At the same time, the Central Bank has lowered the forecasted GDP growth rate for 2012-13 to 5.8% when it was mentioned as 6.5% earlier. The inflation which is based on wholesale price has been revised to 7.7% from 7.3%. Citing the reason for this, the central bank said that growth has been hampered in many emerging and advanced economies and we cannot remain isolated from it. All these factors have hampered global trade and business confidence.
Corporate India needs fund for growth and development. Excess funds in the hands of the banking sector will definitely be an advantage to the business houses and also to the banks. Many business houses have kept their expansion plans on hold for the past two years due to paucity of funds in the corporate sector.