On 29th october 2007, Indian share market zooms, despite rupee is not hiked in such a way.
Acording to sources : RBI gave instructions to Nationalised banks to buy dollar, and due to demand from corporates as well checked rupee rise.
Now RBI increase CRR by 50 basis points to 7.5% . So that now nationalised banks have to maintain CRR ( Cash Reserve ration) to 7.5 %. By doing this excess liquidity in the market absorbed by banks.
Approx 7000-8000 crore rupee drain out said some sources.
Some sources say approx 15,000 crore will be suck out from banking system.
Hike is due to maintain liquidity and due to sharp rise in rupee that creates problem to new job creation.
To maintain price stability, credit quality such measures to be taken.
G-Sec ( Government Security ) - Hike in CRR increases Government securities by 5-6 basis points.
Dollar weaker - Other major currencies Euro and Pound continued to be stronger against dollar.
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