NEW DELHI: In a move to further ease the liquidity situation, the Reserve Bank of India (RBI) on Thursday announced a 100 basis points reduction in the Cash Reserve Ratio (CRR) in a staggered manner through the remainder of 2025. This cut, from 4% to 3% of net demand and time liabilities (NDTL), is expected to release around ₹2.5 lakh crore of primary liquidity into the banking system by November.
Governor Sanjay Malhotra said the CRR reduction is aimed at easing the cost of funds for banks and accelerating the transmission of monetary policy rate cuts to borrowers. "Besides providing durable liquidity, it will also reduce the cost of funding of the banks, thereby helping and accelerating the monetary policy transmission to the credit market," Malhotra said in the post-policy address.
The liquidity conditions have already moved from deficit to surplus, supported by multiple rounds of liquidity infusion by the RBI since January 2025, including open market operations, CRR cut, buy-sell swaps, and variable rate repo windows. These efforts have injected ₹9.5 lakh crore in durable liquidity, Malhotra noted.
The weighted average call money rate — the operating target for monetary policy — has since moved toward the lower end of the policy corridor, reflecting abundant liquidity in the system. The Standing Deposit Facility (SDF) is now at 5.25% while the Marginal Standing Facility (MSF) rate stands at 5.75%, following a 50-basis point repo rate cut announced in the same policy.
Marginal Standing Facility is a window provided to banks to borrow overnight funds at higher than repo rate. SDF is a tool through which RBI absorbs excess liquidity from the system. It allows banks to deposit surplus deposits with RBI at a rate 25 bps lower than repo rate.
Despite this, the RBI acknowledged that transmission of policy easing to the credit markets remains limited but is showing early signs. The central bank reiterated its commitment to proactive liquidity management to support both financial stability and credit growth, amid a benign inflation outlook and a challenging global macroeconomic environment.