Mumbai: The Reserve Bank of India (RBI) Friday said banks will need to maintain 99 per cent of the required cash reserve ratio (CRR) daily starting October 16, up from 90 per cent at present.
The move follows a review of the current liquidity condition in the banking system.
“On a review of the current liquidity conditions, it has been decided to increase the minimum daily maintenance of the CRR from 90 per cent of the requirement to 99 per cent effective from the fortnight beginning October 16, 2026,” RBI said in a release.
At presently, scheduled banks are mandated to maintain not less than 90 per cent of the required CRR on all days during a fortnight in such a manner that the average of CRR maintained daily shall not be less than the CRR prescribed by the Reserve Bank.
The move will help reduce the banking system liquidity, which stood at a surplus of around Rs 3.88 lakh crore as of October 8.
The RBI has been taking various steps to absorb the excess liquidity from the system over the last two months, including conducting Variable Rate Reverse Repo (VRRR) auctions and bond purchases through open market operations.
Earlier this week, Governor Sanjay Malhotra assured that the excess liquidity will not last beyond the end of FY27, but specified that increasing the CRR will be the least preferred option.
The banking system was flushed with liquidity due to heavy mobilisation of FCNR(B) deposits by banks, as the mobilisation brought foreign currency into the system, while subsequent swaps with the RBI provided rupee liquidity to banks.
Besides FCNR(B) inflows, month-end government expenditure, including payments toward salaries and pensions, also added to liquidity in the banking system.