The Reserve Bank of India (RBI) on Monday cut the cash reserve ratio by 25 basis points to 4.50 per cent in its monetary policy review. The decision will infuse Rs 17,000 crore into the banking system. It is good news for both banks and industry because; now bank can lend more money to the industrialist.
The central bank kept key interest rates unchanged. The repo rate was kept at 8%. Primary focus of RBI is on the inflation for the welfare of the general population as the inflation rate is high in the country.
As we all know that when the supply of money will increase in the system, then more people will become able to buy the same product in the market and competition will increase on that price. So, it will push the price of the product in the upward direction and price of that product will increase in the market.