RBI decides to withdraw incremental CRR in a phased manner – Dainik Savera Times

Mumbai: The Reserve Bank of India (RBI) on Friday decided to withdraw the incremental cash reserve ratio (I-CRR). It was implemented to cut down on excess cash after the announcement of demonetisation of Rs 2,000 notes. Announcing the phased withdrawal of I-CRR in a statement, RBI said that it will start from Saturday. The Reserve Bank, in its instructions issued to banks on August 10, had said that they should maintain 10 percent incremental cash reserve ratio (I-CRR) between May 19 and July 28. The move was aimed at absorbing excess cash in the banking system arising from various factors, including withdrawal of Rs 2,000 notes.

After a review, it has been decided to withdraw I-CRR in a phased manner, the central bank said in a statement. RBI said that after assessing the existing and emerging liquidity conditions, it was decided that the cash taken from the financial system under I-CRR will be released in a phased manner. The reason behind this decision was that the system should not face sudden liquidity shocks and the money market could function in an orderly manner.

RBI said that 25 percent of the I-CRR amount kept with banks will be released on September 9 and 25 percent amount will be released on September 23. The remaining amount will be released on October 7. RBI Governor Shaktikanta Das, while announcing I-CRR, had indicated that the provision is a temporary measure for cash management. RBI had said that I-CRR will be reviewed on or before September 8, 2023, to bring this amount back into the banking system before the festive season.

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