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The Reserve Bank of India has decided to discontinue the incremental cash reserve ratio (I-CRR) in a phased manner. It has been decided that the amounts impounded under the I-CRR would be released in stages.
The regulator had asked banks to park 10 per cent on the increase in their net demand and time liabilities (NDTL) between May 19, 2023 and July 28, 2023. The measure was intended to absorb the surplus liquidity generated by various factors, including the return of ₹2,000 notes to the banking system. It was indicated that the I-CRR was a temporary measure for managing the liquidity overhang and that the I-CRR will be reviewed on September 8, 2023 or earlier with a view to returning the impounded funds to the banking system ahead of the festival season.
“On a review, it has been decided to discontinue the I-CRR in a phased manner. Based on an assessment of current and evolving liquidity conditions, it has been decided 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.,” RBI said.
On September 9, 25 per cent of the I-CRR maintained will be released. Then on September 23, another 25 per cent will be released and the balance 50 per cent will be released by October 7.
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