The Indian rupee fell sharply against its US counterpart during Thursday's early trading. The rupee dropped to 49.2500 against the buck by about 11:35 pm ET. Thereafter, the Indian currency has gained slightly and is now worth 48.79. The dollar-rupee pair closed yesterday's trading at 48.3950.
The Indian central bank slashed the Cash Reserve Ratio or CRR by 100 basis points and raised the interest rates on deposits of non-resident Indians. The Reserve Bank of India, or RBI reduced the cash reserve ratio to 6.5% from 7.5%, with effect from the current reporting fortnight that began on October 11. This will add INR400 billion into the banking system.
The central bank is reducing the cash reserve ratio for the third time this month. On October 6, the RBI had announced a 50 basis points cut, which was the first reduction in CRR in at least five years. Few days later, the central bank had decided to reduce the CRR by 100 basis points more to 7.5%.
The cash reserve ratio is the amount of deposits that a bank must set aside with the central bank.
