The Reserve Bank of India (RBI) has announced a tightening of liquidity management rules, mandating that commercial banks maintain a minimum of 99% of their required Cash Reserve Ratio (CRR) on a daily basis, up from the current threshold of 90%.
The new directive will come into effect starting Oct 16, following a comprehensive review of prevailing liquidity conditions within the banking system.
The central bank’s decision aims to absorb expanding surplus liquidity, which stood at approximately Rs 3.88 lakh crore as of Oct 8. By requiring lenders to hold a higher proportion of their mandatory cash reserves with the central bank each day rather than averaging it over the fortnight, the RBI expects to streamline cash management and prevent excessive volatility in short-term money markets.
Industry analysts observe that this regulatory adjustment will absorb excess lendable funds from commercial banks without altering the overall baseline CRR rate, signalling the RBI’s continued vigilance toward inflation and system stability.
