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Banks to maintain 10% incremental CRR

August 10, 2023

Banks to maintain 10% incremental CRR
The Reserve Bank of India on August 10 said that banks have to maintain a 10 percent incremental cash reserve ratio (ICRR) from August 12 as part of the central bank’s efforts to drain excess liquidity from the banking system following the withdrawal of the ₹2,000 currency note.

On May 19, the RBI announced the withdrawal of the ₹2,000 note, allowing citizens to either exchange the note or deposit it in their accounts. The central bank on August 1 said that ₹3.14 lakh crore worth of ₹2,000 banknotes, or 88 percent in circulation, had returned to the banking system by July 31.
 
ICRR is a temporary measure employed when there is a sudden increase in deposits to drain off the liquidity.
 
Earlier, in November 2016, the central bank announced an ICRR of 100 percent of the increase in net demand and time liabilities (NDTL) of scheduled banks. It was intended to absorb a part of the large increase in liquidity in the system following the withdrawal of the legal tender status of ₹500 and ₹1,000 denomination bank notes.
 
Governor Shakitkanta Das said it was purely a temporary measure to manage liquidity, while the cash reserve ratio (CRR) remains unchanged. The RBI held interest rates unchanged for the third successive time in the current financial year.
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