Oct. 16 – India's central Bank, the Reserve Bank of India will cut the cash reserve ratio (the proportion of their deposits that banks have to maintain in cash with the central bank) by 100 basis points or 1 percent to 6.5 percent, releasing Rs 400 billion rupees ($8.2 billion) into the Indian banking system. This marks the third and steepest cut in CRR in the past two weeks, bringing the CRR down from 9 percent last month.

The RBI has also decided to release Rs 250 billion (US$5 billion) to commercial banks and credit institutions towards a farm waiver scheme immediately. According to the AFP. Last week the RBI announced a cash injection of 600 billion rupees (US$ 12 billion) into the financial system in two instalments. It has also doubled the investment limit for overseas investors in corporate bonds to US$6 billion.

All these measures will collectively, contribute Rs 1,450 billion (US$30 billion) to India's financial system this month.

Further to increase liquidity in the markets, the RBI provided banks that participated in the agricultural debt waiver and relief scheme with Rs 25,000 crore (US$515 million).

In order for banks to meet liquidity requirements of mutual funds, the RBI decided to conduct a special 14 day Repo at 9 percent per annum for a notified amount of 200 billion rupees (US$4 billion). 35 billion rupees of this facility was utilised by banks yesterday, Reuters reported.

The Business Standard also said that to attract foreign currency from non-residents Indians, the central bank has raised the interest rates ceiling on deposits by 50 basis points. However the Times of India added that with the rupee steadily losing ground to the dollar, this may not be very attractive to NRIs since what they gain through a higher interest rate may be more than offset by their money becoming less in dollars. The ceiling for FII investments in debt instruments of companies has been hiked from US$3 billion to US$6billion.

Banks have also been given more headroom to raise funds from their overseas branches. Now, they can borrow up to 50 per cent of their unimpaired tier-I capital from their overseas branches and correspondent banks or US$10 million, whichever is higher. The earlier ceiling was 25 percent.

"These moves are definitely steps to stabilise the banking system," Chanda Kochhar, joint managing director with private sector ICICI Bank, told the AFP.

India's inflation which peaked to 12 percent this summer a 16 year high, has slightly cooled to 11.8 percent.