The Reserve Bank of India has announced that it will discontinue the Incremental Cash Reserve Ratio, or I-CRR for short. Apex Bank will be phased out gradually.
On August 10, 2023, RBI introduced I-CRR to absorb the excess liquidity that arose due to a number of factors, such as the return of Rs. 2,000 banknotes into the banking system. The regulator stated that the I-CRR is actually a temporary measure. The measure will be reviewed on September 8.
What did the RBI state?
The RBI stated that after review the RBI has decided to terminate the I-CRR.
“Based on an assessment of the current and new liquidity conditions, it has been decided that the amounts seized under the I-CRR will be released in phases so that the liquidity of the system is not exposed to sudden shocks and the money markets function in an orderly manner,” the RBI statement said. And.
As per the schedule, RBI will release 25 percent of the funds held by the lender under I-CRR on September 9.
On September 23, the remaining 25 percent of the amount held under the I-CRR will be released. The remaining 50 percent will be released on October 7, the RBI said.
This implies that banks will have enough funds to meet the higher demand for loans in the near future.
Introduction of I-CRR
After announcing the monetary policy, Shaktikanta Das, RBI Governor, on August 10 said that banks should maintain an I-CRR of 10 percent on the increase in NDTL (net demand and time liabilities) between May 19 and 28. July 2023. It entered into force on August 12.
The Reserve Bank of India has said it will review the I-CRR on September 8 or even earlier with a view to returning the seized funds to the banking system. However, the CRR is unchanged at 4.5 percent.
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Categories: Trends
Source: HIS Education