The Reserve Bank of India (RBI) has made a surprising decision to reduce the cash reserve ratio (CRR) by 50 basis points, bringing it down to 4 percent from 4.5 percent.

This adjustment will be implemented in two phases, with cuts of 25 basis points each scheduled for December 14 and December 28.

This is the second change to the CRR in four years, following a significant reduction at the start of the pandemic when the RBI lowered it by 100 basis points to address liquidity challenges.

The CRR is an important tool used by the central bank to manage inflation, control money supply, and ensure liquidity in the economy.

By reducing the CRR, banks will have more liquidity and can lend more as they will be required to maintain lower cash reserves with the RBI.

This move is expected to have a positive impact on the banking sector and the overall economy.