Market welcomes RBI's CRR cut but wants more

"This was sort of overdue, the system was freezing up," Barua said, adding, "It is to address the liquidity crisis, it was indeed a crisis, and RBI has sent out a strong signal that it is concerned."

"They are trying to restore confidence in the domestic credit market. This should be seen as a positive because it is a proactive measure by the central bank. As regard to monetary policy, they may look at relaxing the statutory liquidity ratio now," said Sachchidanand Shukla, economist at Enam Securities.

Agrees K. Ramkumar, head of fixed income at Sundaram BNP Paribas. "This market is already in the ICU. It requires oxygen which has been provided by the RBI."

According to Rupa Rege Nitsure, chief economist, Bank of Baroda, RBI's move was expected "as the liquidity tightness has assumed serious dimensions for India."

"There has been recent news in the public domain that banks are not able to lend due to cash shortages," she said.

"CRR cut of 150 basis points would provide much needed relief to the strained overnight liquidity condition. It will also provide support to front end of the corporate curve and ensure India's insulation from the global financial meltdown," said Shobit Gipta, portfolio manager, ING Investment Management.