The CRR, which is the level of deposits that banks have to mandatorily maintain with the RBI, was reduced to 5.5% from 6%. This marks the RBI’s first reduction in CRR since January 2009 when it had released funds to stimulate demand in the wake of the Lehman Brothers crisis. Bankers said that interest rates are headed down and it is a matter of time before lending rates also come down. The cut in CRR saw the sensex making sharp gains to go past the 17,000 level in intra-day trade on Tuesday. But the move led to a crash in government securities. The RBI’s decision resulted in the rupee going past the 50-mark against the dollar in intra-day trade on Tuesday for the first time in over two months. The Indian currency closed at 50.07.
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