The Reserve Bank of India (RBI) has decided to decrease the cash reserve ratio (CRR) by 50 basis points, injecting Rs 1.16 lakh crore into the banking system. However, the Monetary Policy Committee (MPC) has chosen to keep the repo rate at 6.5 percent for the 11th consecutive meeting, emphasizing a neutral monetary policy stance.

This decision comes at a time when inflation is on the rise, with the Consumer Price Index (CPI) reaching 6.21 percent in October, the highest in 14 months, driven by increasing food prices. The current economic landscape presents challenges, with a growth rate of just 5.4 percent in the July-September 2024 quarter, the lowest since Q3FY23.

Experts suggest that while a maximum of 50 basis points cut in the repo rate is expected in 2025, the reduction in CRR is a positive move that will enhance liquidity in the banking sector.