The Reserve Bank of India (RBI) on Monday said it was cutting the cash reserve ratio (CRR) for banks by half a percentage point to 8.5 percent, effective from Oct. 11, to alleviate pressures caused by the global financial crisis.
The measure would release 200 billion rupees ($4.2 billion) into the banking system, RBI in a statement released after market hours.
The CRR is the proportion of deposits banks need to keep with the RBI.
The measure was ad-hoc and temporary in nature, and would be reviewed on a continuous basis and liquidity management would continue to receive priority in the monetary policy, the RBI said.