RBI to cut CRR by 100 bps in four tranches to boost liquidity, effective Sept

The Reserve Bank of India (RBI) on Friday announced a phased 100 basis points (bps) cut in the Cash Reserve Ratio (CRR) and a surprise 50-bps reduction in the repo rate, bringing it down to 5.5%. This marks the third consecutive rate cut this year by the central bank’s Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra.The CRR, the share of deposits that banks must hold with the RBI, will be reduced from 4% to 3% in four tranches of 25 bps each, beginning September 2025. The move is expected to infuse ₹2.5 lakh crore into the banking system over the coming months, significantly enhancing banks' lending capacity.The surprise 50-bps cut in the repo rate signals the central bank’s concern over a broader economic deceleration. The MPC also shifted its stance from ‘accommodative’ to ‘neutral’, providing flexibility for future policy decisions.The RBI had previously cut the repo rate by 25 bps each in February and April. With Friday’s announcement, the cumulative repo rate cut this year now stands at 100 bps.