RBI to withdraw I-CRR by Oct 7 in phased manner

RBI said it would discontinue the incremental cash reserve ratio (I-CRR) requirement imposed on banks and return the impounded funds in phases ahead of the festival season when the demand for cash rises.

Out of the total I-CRR maintained, 25 per cent will be disbursed on September 9, another 25 per cent on September 23, and the remaining on October 7. It was estimated that around Rs. 1 trillion worth of liquidity was impounded due to the I- CRR requirement.

The central bank in a statement said the decision was taken based on an assessment of current and evolving liquidity conditions so that the “liquidity in the system is not subjected to sudden shocks and money markets function in an orderly manner”.

During the August review of the monetary policy, the RBI mandated all scheduled banks to maintain an I-CRR of 10 per cent on the increase in their net demand and time liabilities (NDTL) between May 19 and July 28, with effect from August 12.

“It was largely along the expected lines as the market was expecting it to be rolled back in two tranches of 50-50. There might have been some disappointment in the market but it was mostly along the expectations, with the big relief that liquidity would come back to the system before the onset of the festival season,” said Prasanna Patankar, managing director, STCI Primary Dealer Ltd.

“The RBI normally prefers to keep liquidity in the neutral zone and anything beyond that they try to stabilise it,” he added.