New Delhi
The Reserve Bank of India (RBI) has decided to discontinue the need for scheduled banks to maintain an incremental cash reserve ratio (I-CRR) of 10 percent based on the growth in their net demand and time liabilities (NDTL). The amounts held under this requirement will be gradually released to ensure the stability of system liquidity and the orderly functioning of money markets. This decision aligns with RBI Governor Shaktikanta Das’ monetary policy statement from August 10, 2023. Under this policy, scheduled banks were mandated to maintain an I-CRR of 10 percent on the growth in their NDTL between May 19, 2023, and July 28, 2023. The objective was to absorb excess liquidity generated by various factors, including the return of Rs 2,000 notes to the banking system. The RBI stated that the I-CRR was a temporary measure to manage the excess liquidity and that it would be reviewed by September 8, 2023, or earlier to return the impounded funds to the banking system in anticipation of the festival season. Following the review, it has been decided to phase out the I-CRR requirement. The released funds will follow this 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. This phased approach aims to prevent any abrupt shocks to system liquidity and to ensure the smooth functioning of money markets.
