RBI To Discontinue Incremental Cash Reserve Ratio In Phased Manner From October

The Reserve Bank of India (RBI) announced that it has decided to discontinue the incremental cash reserve ratio (I-CRR) in a phased manner. “On a review, it has been decided to discontinue the I-CRR in a phased manner,” the central bank said in a statement.

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The central bank also added 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, based on an assessment of current and evolving liquidity conditions.

RBI will release 25% of the I-CRR maintained on September 9 and another 25% on September 23 and remaining 50% of the I-CRR maintained will be released on October 7, the central bank said.

RBI Governor Shaktikanta Das said, on August 10, in his monetary policy statement that all scheduled banks will have to maintain a 10% incremental cash reserve ratio (ICRR) from August 12.

"The incremental CRR was considered necessary in the background of the liquidity overhang. We considered it desirable in interest of financial and price stability. It will have an impact on inflation also. It is a purely temporary measure," Das said.

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Das further added that the intent was to absorb the surplus liquidity generated by various factors including the return of ₹2,000 notes to the banking system. The net impact of the incremental CRR, as per RBI’s internal calculation, was a little over Rs 1 lakh crore.