RBI decides to withdraw incremental CRR by Oct 7

Mumbai, September 8

The Reserve Bank of India (RBI) on Friday decided to discontinue the Incremental Cash Reserve Ratio (I-CRR), which was put in place to absorb surplus liquidity following the withdrawal of Rs 2,000 currency notes, in a phased manner beginning Saturday.

On August 10, the RBI mandated banks to maintain an incremental cash reserve ratio (I-CRR) of 10% on the increase in their net demand and time liabilities (NDTL) between May 19, 2023 and July 28, 2023.

Amount to be released in THREE stages

• On August 10, the RBI mandated banks to maintain an incremental cash reserve ratio (I-CRR) of 10% to absorb the surplus liquidity generated by various factors, including the return of Rs 2,000 notes to the banking system
• The central bank has decided that the amounts impounded under the I-CRR would be released in stages so that system liquidity is not subjected to sudden shocks
• 25% of the amount of I-CRR maintained by banks will be released on Saturday and another 25% on September 23. The rest will be released on October 7

The measure was intended to absorb the surplus liquidity generated by various factors, including the return of Rs 2,000 notes to the banking system.

“On a review, it has been decided to discontinue the I-CRR in a phased manner,” the central bank said.

Based on an assessment of current and evolving liquidity conditions, it has been decided that the amounts impounded under the I-CRR would be released in stages so that system liquidity is not subjected to sudden shocks and money markets function in an orderly manner, it added.

The RBI said 25% of the amount of I-CRR maintained by banks will be released on Saturday and another 25% on September 23. The rest will be released on October 7.