In order to inject more liquidity in the market, the Reserve Bank of India (RBI) has decided to cut repo rate by 50 basis points to 7.5% with effect from November 3.

Moreover, the central bank has also decided to cut the cash reserve ratio (CRR), by 100 bps in two stages to 5.5%. The first stage of CRR cut would be with effect October 25, and the second stage would come into effect November 8.

Along with repo rate and CRR, RBI will also cut SLR to 24% by 100 bps from November 8 onwards.

Experts believe that SLR cut would inject about Rs 40,000 crore into the banking system.

In a press release, the RBI said, “The Reserve Bank has reviewed the current and evolving macroeconomic situation and liquidity conditions in the global and domestic financial markets.”

“On the growth front, it is important to ensure that credit requirements for productive purposes are adequately met so as to support the growth momentum of the economy. Domestic financial markets have been functioning normally. Prudent regulatory surveillance and effective supervision have ensured that our financial sector has been and continues to be robust. However, the global financial turmoil has had knock-on effects on our financial markets; this has reinforced the importance of focusing on preserving financial stability, it added up.