The Reserve Bank on Wednesday further cut by one per cent, the amount of mandatory cash that banks need to park with it - a move that would unlock Rs 40,000 crore into the financial system and pave the way for lower lending rates.

This is the third time that the central bank has cut the Cash Reserve Ratio in two weeks, bringing the combined cut to 2.50 per cent that released a total of Rs 100,000 crore into the cash-starved banking sector so that they can resume normal lending operations.

With this cut, the CRR would be 6.5 per cent as against 9 per cent at the start of this month. RBI has also raised the interest rates ceiling on deposits by non-residents by 50 basis points to attract foreign funds inflow.