RBI announces withdrawal of incremental cash reserve ratio (I-CRR) - (08 Sep 2023)
RBI decides to discontinue the I-CRR in a phased manner. 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.
In pursuance of Governor’s Monetary Policy Statement of August 10, 2023, scheduled banks were required to maintain an incremental cash reserve ratio (I-CRR) of 10 per cent on the increase in their net demand and time liabilities (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 ₹2000 notes to the banking system.
It was indicated in the Monetary Policy Statement 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. The CRR is a mandatory reserve amount that banks must maintain with the RBI. The existing cash reserve ratio (CRR) remains unchanged at 4.5 per cent. It serves to ensure the stability of the banking system and cannot be used for lending or investments.
Tags : I-CRR REVIEW WITHDRAWAL