MUMBAI, Oct 15: India’s central bank said on Wednesday it was injecting a further 400 billion rupees ($8.25 billion) into the financial system by cutting the cash reserve commercial banks must hold to 6.5 per cent.

The move by the Reserve Bank of India is the third such cut in the past two weeks, bringing down the cash reserve ratio (CRR) from nine per cent at the start of the month.

Last week the RBI announced an injection of 600 billion rupees into the financial system in two instalments.

The RBI said it will also disburse 250 billion rupees immediately to commercial banks and credit institutions towards a farm waiver scheme.

It has also doubled the investment limit for overseas investors in corporate bonds to six billion dollars.

Under various measures, the bank has added 1,450 billion rupees to the system this month.

“The Indian inter-bank unsecured money market has been functioning normally... However, the continuing uncertain global situation is having an indirect impact on our financial markets,” the RBI said in a statement.

“We will monitor developments in the financial markets closely and respond swiftly, even pre-emptively to any adverse external developments impinging on domestic financial stability and inflation expectations.”

Analysts welcomed the latest move.

“All these measures are to boost foreign investor sentiment and soothen nerves. We may not see an immediate impact, but these are the right moves,” said principal economist D.K Joshi with rating agency Crisil.

By end of trade Wednesday, overseas funds outflows stand at $10.88 billion for the year, which has pulled the benchmark 30-share Sensex down 46.7 percent in the same period.

“These moves are definitely steps to stabilise the banking system,” said Chanda Kochhar, joint managing director with private sector ICICI Bank.

Economists said an immediate rate cut may not come about at the RBI’s next meeting on October 24.

“A repo rate cut is unlikely as inflation concerns persist,” Joshi said.

India’s inflation, which was riding at over 16-year highs, has eased to 11.8 percent as crude oil and commodity prices have come down in recent weeks.—AFP