From The Heroes of Might and Magic III wiki

Grail building for the Castle.

To build this structure, find and bring the Grail artifact to a Castle town, and click on the Village/Town/City Hall or Capitol, and you will be asked if this is where you want the permanent home of the Grail to be.

The Grail grants the following to all town types:

• 5000 extra gold per day
• 50% additional creature growth

The Colossus in particular also:

• Increases the Morale of all your heroes by 2

[edit] Comment

The documentation states "Increases the Morale of all allied heroes by 2", but this appears to be wrong.