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 "RBI, Reserve Bank of India")
Representative Image (Photo: Bloomberg)
The Reserve Bank of India has decided to discontinue the Incremental Cash Reserve Ratio (I-CRR) by 7 October in a phased manner, the central bank announced in a release on Friday. Out of the total I-CRR maintained, 25 per cent will be disbursed on 29 September, another 25 per cent on 23 September, and the remaining 50 per cent will be released on 7 October.
“Based on an assessment of current and evolving liquidity conditions, the decision has been taken to release the amounts impounded under the I-CRR in stages so that system liquidity is not subjected to sudden shocks and money markets function in an orderly manner,” the release stated.
During its August review of the monetary policy, the Reserve Bank of India required 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 19 May 2023 and 28 July 2023, effective from 12 August.
The central bank noted that the I-CRR decision would be reviewed on or before 8 September.
The net impact of the incremental CRR was estimated to be slightly more than Rs 1 trillion.
The decision was in line with the expectations of market participants. “The phased discontinuation is along expected lines; however, some were anticipating a reduction to 5 per cent, while another section expected between 6 and 8 per cent,” a dealer at a primary dealership remarked. “The positive aspect is the decision to withdraw it by October, something the market had not anticipated,” he added.
On Thursday, banks parked Rs 76,047 crore of surplus funds with the central bank, followed by Rs 93,935 crore on Wednesday. On Monday and Tuesday, banks had parked more than Rs 1.5 trillion.
First Published: Sep 08 2023 | 3:23 PM IST
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