The Reserve Bank of India (RBI), on a review has decided to discontinue the Incremental Cash Reserve Ratio (I-CRR) in a phased manner. This has been said after the review of the assessment of the ongoing liquidity conditions, the RBI press release on I-CRR review said.
The RBI decided that the release of funds would be in phased manner, in 3 phases, the press communique said, with 25% release on September 9; another 25% on September 23 and 50% on October 7. This has been planned so by the Central Bank, so as to not disturb the money market functioning and the liquidity in the system by any sudden shocks.
When implemented, the RBI had mentioned that the measure was of temporary in nature and that a review would be taken up on September 8 or before, so that the funds thus collected could be returned to the banking system prior to the festival season. The measure was introduced, said the release, to absorb the liquidity brought into the system by several factors, which also included the liquidity generated by the Rs. 2000 notes’ comeback to the banking system.
As per the August 10 Central Bank Governor’s monetary Policy Statement, the scheduled banks were required to keep an I-CRR of 10 % on the increase of their net demand and time liabilities (NDTL) between the dates May 19 and July 28, 2023.