The Reserve Bank of India (RBI) has decidedly shifted its monetary stance in favour of growth by taking a slew of measures including cuts in the signal repo rate, the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR). It plans to buy back market stabilisation scheme bonds issued earlier to sterilise the expansionary impact of huge capital inflows.

In a weekend surprise move, it cut the repo rate (the rate at which it lends to banks, and which, in turn, is a signal to banks for paring their lending rates) by 50 basis points to 7.5 per cent. This is the second reduction in the last two weeks. The RBI had pared the repo rate by 100 basis points to 8 per cent on October 20. The latest cut is clearly aimed at encouraging investments by making funds more affordable to borrowers and removing apprehensions regarding the change in its policy stance.

With liquidity conditions remaining tight during the week and call money rates soaring to 21 per cent on Friday, the central bank further slashed the cash reserve ratio (the portion of deposits banks need to keep with the RBI without earning any interest) by 100 basis points to 5.5 per cent. This will infuse Rs 40,000 crore into the system in two equal tranches, starting on October 25 and November 8. The reduction in CRR comes on top of the 250 basis points cut in the second half of October that had injected Rs 100,000 crore into the system.

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