RBI & Policy · Daily brief

RBI cuts CRR from 4% to 3% in four phases through November 2025

A phased reduction will inject ₹2.5 lakh crore into the banking system, expanding lending capacity and supporting the central bank's 6.5% GDP growth target for FY26.

₹2.5 lakh croreLiquidity injection

FINSAMUDRA DESK · 20 Aug 2025, 3:05 pm IST · 1 MIN

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4% → 3% (phased Sept–Nov 2025)CRR reduction

79% (room for expansion)Credit-deposit ratio

🚨 RBI’s Phased CRR Cut: 4% → 3% (Sept–Nov 2025) — Image: Finsamudra LinkedIn archive

The Reserve Bank of India announced a four-step CRR (cash reserve ratio) cut starting September 6, 2025. Banks will see their reserve requirement fall from 4% to 3% across phases ending November 29. Each step—3.75%, 3.50%, 3.25%, and finally 3%—is spaced roughly four weeks apart.

This injection of ₹2.5 lakh crore gives banks substantially more dry powder for lending. With a credit-deposit ratio currently at 79%, lenders have meaningful room to expand advances to businesses and consumers. Lower reserve requirements translate directly into cheaper funds for banks to lend out.

The banking sector enters this easing from a position of strength. Capital adequacy stands at 17%, well above regulatory minimums. Net interest margins remain stable at 3.5% despite competitive pressure. Bank credit grew 12.1% in FY25, and the sector's liquidity ratio of 132% provides ample cushion for the transition.

Notably, the RBI kept its repo rate unchanged at 5.5%, allowing previous rate cuts to fully transmit through the economy before new liquidity support kicks in. Analysts describe this as calibrated easing—supporting growth without reigniting inflation. Bank stocks rallied immediately after the announcement, signalling market confidence in the credit expansion ahead.

RBI cuts CRR from 4% to 3% in four phases through November 2025

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