Financial markets are under stress and require steps by the central bank for market stability and revival of economic growth, he said while announcing the decisions taken by the Monetary Policy Committee (MPC) here.
As part of liquidity infusion measures, he said, the Reserve Bank of India (RBI) will undertake repo operation of up to Rs 1 lakh crore to infuse liquidity into the market.
Further, he announced reduction in cash reserve ratio (CRR) of all banks by 100 bps to 3 per cent from 4 per cent, with effect from March 28 for one year. This is expected to release Rs 1.37 lakh crore liquidity in the market, he said.
CRR is the percentage of deposits that banks have to mandatorily keep with the central bank.
RBI last reduced CRR on February, 2013, by 25 basis points.
In all, Rs 3.74 lakh crore liquidity to be injected into system through the measures announced today (Friday), he added.
The governor also assured the public that the banking system in India was safe.
