The Reserve Bank of India (RBI) will by October 7 discontinue the Incremental Cash Reserve Ratio (I-CRR), it said in a press release on Friday. Out of the total I-CRR maintained, 25 per cent will be disbursed on September 29, another 25 per cent on September 23, and the rest on October 7.
“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,” said the release.
In the August review of the monetary policy, RBI mandated all scheduled banks 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 and July 28, 2023, with effect from August 12.
RBI had said the I-CRR decision will be reviewed on or before September 8.
The net impact of the incremental CRR was estimated to be a little more than Rs 1 trillion.
The decision was along the expectations of the market participants. “The decision to discontinue it in a staggered manner is along the expectations; however, some people were expecting it to be cut to 5 percent, but another section of the market was expecting somewhere between 6-8 per cent,” a dealer at a primary dealership said. “The good thing is they decided to withdraw it by October, something the market was not looking at,” he added.
On Thursday, banks parked Rs 76,047 crore of excess funds with RBI, followed by Rs 93,935 crore on Wednesday. On Monday and Tuesday, they parked more than Rs 1.5 trillion.
First Published: Sep 08 2023 | 3:23 PM IST