MUMBAI: The Reserve Bank decided to quit on Friday Incremental cash reserve ratio (I-CRR), which was introduced to absorb excess liquidity following the withdrawal of Rs 2,000 notes, phased in from Saturday. On August 10, the RBI mandated banks to maintain an incremental cash reserve ratio (I-CRR) of 10 percent on the increase in their net demand and time commitments (NDTL) between May 19, 2023 and July 28, 2023.
The measure was designed to absorb the excess liquidity generated by various factors, including the return of Rs 2,000 notes to the banking system.
“A review has led to the decision to phase out the I-CRR,” the central bank said in a statement.
Based on an assessment of current and evolving liquidity conditions, it was decided that the amounts seized under the I-CRR would be released in stages so that system liquidity is not exposed to sudden shocks and money markets can move in an orderly manner. Operate. .
The RBI said 25 percent of the amount of I-CRR held by the banks will be released on Saturday and another 25 percent on September 23. The rest will be released on October 7.
At the announcement of the I-CRR, RBI Governor Shaktikanta Das indicated that the provision was a temporary measure to manage the excess liquidity.
The RBI had announced that the I-CRR would be reviewed on September 8, 2023, or earlier, with the intention of returning seized funds to the banking system before the festival season.
After the withdrawal of the Rs 2,000 notes, liquidity in the banks had increased significantly; the I-CRR was intended to absorb the excess cash.
A whopping 93 percent of the Rs 2,000 notes in circulation on May 19 – the day the coin was withdrawn from circulation – have been returned to banks.
The total value of Rs 2,000 banknotes returned from circulation is Rs 3.32 lakh crore till 31 August 2023.
The measure was designed to absorb the excess liquidity generated by various factors, including the return of Rs 2,000 notes to the banking system.
“A review has led to the decision to phase out the I-CRR,” the central bank said in a statement.
Based on an assessment of current and evolving liquidity conditions, it was decided that the amounts seized under the I-CRR would be released in stages so that system liquidity is not exposed to sudden shocks and money markets can move in an orderly manner. Operate. .
The RBI said 25 percent of the amount of I-CRR held by the banks will be released on Saturday and another 25 percent on September 23. The rest will be released on October 7.
At the announcement of the I-CRR, RBI Governor Shaktikanta Das indicated that the provision was a temporary measure to manage the excess liquidity.
The RBI had announced that the I-CRR would be reviewed on September 8, 2023, or earlier, with the intention of returning seized funds to the banking system before the festival season.
After the withdrawal of the Rs 2,000 notes, liquidity in the banks had increased significantly; the I-CRR was intended to absorb the excess cash.
A whopping 93 percent of the Rs 2,000 notes in circulation on May 19 – the day the coin was withdrawn from circulation – have been returned to banks.
The total value of Rs 2,000 banknotes returned from circulation is Rs 3.32 lakh crore till 31 August 2023.
ADVERTISEMENT