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Fixed Income

RBI Cuts CRR by 100 bps again

From last Friday’s move to cut CRR by 1.5%, another 1% has been taken off today. From RBI:

The cash reserve ratio (CRR) of scheduled banks is currently at 7.5 per cent of their net demand and time liabilities (NDTL). On a review of the evolving liquidity situation, it has been decided to reduce the CRR by 100 basis points to 6.5 per cent of NDTL with effect from the current reporting fortnight that began on October 11, 2008. This measure will release additional liquidity into the system of the order of Rs.40,000 crore.

Time also for a repo rate cut? What are they waiting for? It’s time to buy gilt funds I think. There is less than 3000 cr. in gilt funds most of whom invest in things like corporate deposits (I don’t know why!). I’ve moved out of my liquid plan (did that a week back, before this drama) and will likely move into gilts.

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