RBI raises banks’ daily CRR floor to 99%
Banks lose room to shift reserves as surplus liquidity keeps rates below
Overview
Banks will have less freedom to manage cash from day to day as the tackles a large surplus that has kept below its 5.50% . The has not raised the itself, which remains 3% of deposits and other specified liabilities. Instead, banks must now hold at least 99% of that requirement each day, up from 90%, while still meeting the full amount on average over a fortnight. The change limits their ability to temporarily use reserve cash and replace it later.
The is also selling ₹25,000 crore of , directly removing money from banks. Together with earlier cash-absorption operations, these steps should bring short-term rates closer to the policy rate and strengthen the ’s control. Banks will have smaller liquidity cushions, which could make lending costlier or slower, while government-bond yields may rise as investors absorb the extra supply. The measures improve , but could tighten credit for businesses and households if the effect lasts.
Timeline
99% daily CRR rule takes effect
The higher minimum daily CRR requirement begins with the starting October 16. Together with the ₹25,000 crore bond sale and earlier , it is intended to restore closer alignment between overnight rates and the repo rate, mainly by improving the RBI’s control of rather than by raising the prescribed CRR ratio.
Bond yields respond to liquidity withdrawal
The auction removed the planned amount of while adding government securities to the market. Analysts expected the operation and the tighter to keep short-term liquidity firmer and influence bond yields, although the immediate effect depended on how banks and investors redistributed their holdings.
RBI announces ₹25,000 crore bond auction
The RBI announced a of government securities worth ₹25,000 crore for October 13, with reported bids of ₹66,590 crore, ₹84,982 crore and ₹67,655 crore across the .
Markets price tighter liquidity
Market participants expected the daily change and the bond sale to tighten liquidity conditions and push overnight rates closer to the 5.50% . The bond-sale announcement was also expected to put upward pressure on as banks and investors adjusted to the additional .
Fortnightly averaging remains in place
Banks will continue to meet the prescribed 3% CRR on a while facing the higher 99% . The rule reduces their ability to hold materially less than the requirement on one day and compensate with larger balances later in the reporting fortnight.
RBI raises daily CRR maintenance to 99%
The RBI decided that banks must maintain at least 99% of their prescribed CRR every day from the beginning October 16, up from 90%. The prescribed CRR ratio itself remains 3% of , so the decision changes daily flexibility rather than raising the headline reserve ratio.
RBI announces ₹25,000 crore bond sale
The RBI announced an of worth for October 13. Selling bonds withdraws rupees from banks, unlike a repo-rate increase, which changes the policy price of money without directly removing a specified amount of liquidity.
Surplus falls but remains substantial
The stood at about ₹3.88 lakh crore on October 8, despite earlier absorption operations. The persistence of excess cash kept the below the repo rate and strengthened the case for additional operating measures.
Liquidity surplus remains unusually large
Average daily had reached about since the previous policy meeting. Earlier in October, measured surpluses exceeded ₹5 lakh crore, prompting the RBI to conduct to absorb cash.
RBI raises repo rate to 5.50%
The increased the by 25 to 5.50%, while the RBI said surplus liquidity had become more than necessary. Governor Sanjay Malhotra said the central bank would use a mix of to improve and bring overnight market rates closer to the policy rate.