The Reserve Bank of India (RBI) has announced a 150 basis points (bps) cut in the Cash Reserve Ratio (CRR) to 7.5% with effect from tomorrow, instead of to 8.5 percent as previously announced.

According to market experts, the CRR cut is definitely a positive move, which is going to soothe some liquidity fears. The cut is expected to inject liquidity into the system to the tune of Rs 60,000 crore.

The announcement came close on the heels of a sharp fall of over 10 per cent to 10,239.76 in opening trade as foreign funds dumped heavy-weight stocks owing to spreading global financial crisis amid depreciating Indian rupee. Soon after the announcement, the Sensex recovered a bit.

Recently, Finance Minister P Chidambaram had assured the nation that liquidity will be injected into the system if the need arises.