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October 22, 2001
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CRR rate hike to earn Indian banks Rs 10 billion

CREDIT
POLICY
Indian banks will earn Rs 10 billion in the current year to March 2002 from the hike in interest rate paid on cash reserves they hold with the central bank, RBI Governor Bimal Jalan said on Monday.

In its mid-term monetary policy review announced earlier in the day, the Reserve Bank of India said it will pay the bank rate -- currently at 6.5 per cent -- on cash reserve balances banks held with it.

Earlier, it paid an interest of six per cent.

The RBI has also lowered the amount banks need to maintain as cash balances with the central bank.

In the policy, it announced a cut in the cash reserve ratio to 5.5 per cent from 7.5 per cent in two phases.

The first cut to 5.75 per cent will be from November 3, and the second to 5.5 per cent takes effect on December 29.

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