The Reserve Bank of India has raised the minimum daily cash reserve ratio (CRR) maintenance requirement for scheduled banks to 99 per cent of the prescribed requirement, up from 90 per cent, effective from the fortnight beginning October 16, 2026.
The decision, announced in a notification issued on Friday, follows a review of prevailing liquidity conditions in the banking system. It comes days after the central bank's Monetary Policy Committee raised the policy repo rate by 25 basis points to 5.50 per cent, the first rate increase in two and a half years, and shifted its stance to calibrated tightening.
What changes for banks
CRR is the share of deposits that banks must hold as cash balances with the RBI, on which they earn no interest. The prescribed ratio currently stands at 3 per cent. Under the revised rule, banks must maintain at least 99 per cent of that requirement on every day of the reporting fortnight, while ensuring the average over the fortnight is no less than the full requirement.
Bankers say the change will curtail operational flexibility. Until now, banks could hold 90 per cent on some days and make it up later in the fortnight; under the new norm they will need to keep balances close to the full requirement at all times. The last time the RBI set daily maintenance at 99 per cent was in July 2013, during the rupee volatility that followed the US Federal Reserve's "taper tantrum".
Draining the surplus
The move is aimed at absorbing surplus liquidity, estimated at around Rs 4 lakh crore, fuelled partly by heavy mobilisation of FCNR(B) deposits and month-end government expenditure. The RBI has also announced an open market operation sale of government securities worth Rs 25,000 crore on October 13.
Governor Sanjay Malhotra had earlier said excess liquidity would not last beyond the end of FY27, though he had called a CRR increase the least preferred option for absorbing it. The central bank has been running variable rate reverse repo auctions and bond purchases through open market operations over the past two months.
Sources: Business Standard: RBI tightens liquidity after rate rise, raises daily CRR maintenance to 99%; ET BFSI: RBI Imposes Stricter Cash Reserve Ratio on Banks to Curb Liquidity
The decision, announced in a notification issued on Friday, follows a review of prevailing liquidity conditions in the banking system. It comes days after the central bank's Monetary Policy Committee raised the policy repo rate by 25 basis points to 5.50 per cent, the first rate increase in two and a half years, and shifted its stance to calibrated tightening.
What changes for banks
CRR is the share of deposits that banks must hold as cash balances with the RBI, on which they earn no interest. The prescribed ratio currently stands at 3 per cent. Under the revised rule, banks must maintain at least 99 per cent of that requirement on every day of the reporting fortnight, while ensuring the average over the fortnight is no less than the full requirement.
Bankers say the change will curtail operational flexibility. Until now, banks could hold 90 per cent on some days and make it up later in the fortnight; under the new norm they will need to keep balances close to the full requirement at all times. The last time the RBI set daily maintenance at 99 per cent was in July 2013, during the rupee volatility that followed the US Federal Reserve's "taper tantrum".
Draining the surplus
The move is aimed at absorbing surplus liquidity, estimated at around Rs 4 lakh crore, fuelled partly by heavy mobilisation of FCNR(B) deposits and month-end government expenditure. The RBI has also announced an open market operation sale of government securities worth Rs 25,000 crore on October 13.
Governor Sanjay Malhotra had earlier said excess liquidity would not last beyond the end of FY27, though he had called a CRR increase the least preferred option for absorbing it. The central bank has been running variable rate reverse repo auctions and bond purchases through open market operations over the past two months.
Sources: Business Standard: RBI tightens liquidity after rate rise, raises daily CRR maintenance to 99%; ET BFSI: RBI Imposes Stricter Cash Reserve Ratio on Banks to Curb Liquidity
