RBI Tightens Liquidity Management, Raises Minimum Daily CRR Maintenance to 99% from Oct 16

New Delhi, Oct 10 (KNN) The Reserve Bank of India (RBI) on Friday raised the minimum daily cash reserve ratio (CRR) maintenance requirement for banks to 99 per cent from 90 per cent of the prescribed requirement, effective from the fortnight beginning October 16, 2026, tightening its liquidity management framework.

The move follows the RBI's decision earlier this week to raise the policy repo rate by 25 basis points to 5.50 per cent, the first increase in two-and-a-half years. The central bank has also announced an open market operation (OMO) sale of government securities worth Rs 25,000 crore on October 13 to absorb surplus liquidity from the banking system.

The RBI has not changed the overall CRR requirement, which remains at 3 per cent of banks' net demand and time liabilities. Instead, it has reduced banks' flexibility to maintain lower cash reserves on individual days.

Banks Face Tighter Daily Reserve Requirements

Under the revised framework, banks must maintain at least 99 per cent of their prescribed CRR on each day of the reporting fortnight, while ensuring that their average daily balance over the fortnight remains at or above the prescribed requirement.

Under the earlier framework, banks were required to maintain at least 90 per cent of the prescribed CRR daily. The higher threshold could constrain their flexibility in managing short-term liquidity needs, with the impact varying according to individual banks' reserve positions.

The last time the RBI raised the minimum daily CRR maintenance requirement to 99 per cent was in July 2013, amid volatility in the foreign exchange market following the US Federal Reserve's tapering announcement. The requirement was subsequently reduced to 95 per cent in September 2013 and to 90 per cent in April 2016.

CRR is the proportion of banks' deposits that must be maintained as cash balances with the RBI. Banks do not earn interest on these balances.

RBI Seeks to Align Call Rates with Repo Rate

The measures are aimed at bringing the weighted average call rate (WACR), the operating target of monetary policy, closer to the policy repo rate of 5.50 per cent.

The WACR stood at 5.31 per cent on Friday, compared with 5.30 per cent on Thursday, remaining below the repo rate. Since the August monetary policy review, it has traded an average of 14 basis points below the policy rate.

The standing deposit facility (SDF) rate of 5.25 per cent sets the floor of the interest rate corridor, while the marginal standing facility (MSF) rate of 5.75 per cent sets the ceiling.

In his October 7 monetary policy statement, RBI Governor Sanjay Malhotra said the central bank would use an appropriate mix of liquidity management tools to align the WACR with the repo rate.

(KNN Bureau)