RBI to discontinue I-CRR requirement for banks, funds to be released in phases

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

PGurus Newsdesk

September 8, 2023

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

RBI decides to withdraw incremental cash reserve ratio by October 7 in a phased manner

The Reserve Bank of India (RBI) has decided to discontinue the requirement for scheduled banks to maintain an incremental cash reserve ratio (I-CRR) of 10 percent on the increase in their net demand and time liabilities (NDTL).

Subsequently, the amounts impounded under the exercise would be released in stages.

This will be done to ensure that system liquidity is not subjected to sudden shocks and money markets function in an orderly manner, a statement issued by the RBI said on Friday.

In pursuance of RBI governor Shaktikanta Das’ monetary policy statement of August 10, 2023, scheduled banks were required to maintain an incremental cash reserve ratio (I-CRR) of 10 percent on the increase in their NDTL between May 19, 2023, and July 28, 2023.

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.

It was indicated that the I-CRR is a temporary measure for managing the liquidity overhang and that the I-CRR will be reviewed on September 8, 2023, or earlier, with a view to returning the impounded funds to the banking system ahead of the festival season.

Upon review, it has now been decided to discontinue the I-CRR in a phased manner, the RBI statement 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.

The release of funds would be as per the following schedule:

On September 9 — 25 percent of the I-CRR maintained.

On September 23 — 25 percent of the I-CRR maintained.

On October 7 — 50 percent of the I-CRR maintained.

[With Inputs from IANS]

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