What changed
The statutory minimum CRR of 3% of total demand and time liabilities was eliminated following the RBI (Amendment) Act 2006. RBI can now prescribe CRR without any floor or ceiling rate. The CRR rate remains unchanged at 5%, and the same four categories of liabilities continue to be exempt from this requirement.
What it means for you
Banks no longer have a statutory floor on CRR, giving RBI full flexibility to adjust reserve requirements for monetary stability. The immediate impact is nil as the rate stays at 5% and exemptions remain, but future CRR changes can be more aggressive without legal constraints. Banks should monitor RBI's monetary policy stance closely for potential CRR hikes or cuts.
What you must do
- Continue maintaining CRR at 5% of net demand and time liabilities as before.
- Ensure exempt liabilities (inter-bank, ACU, CBLO, OBU) are correctly excluded from CRR computation.
- Update internal CRR compliance systems to reflect removal of the 3% statutory floor.
- Prepare for possible CRR rate changes in future monetary policy reviews.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Treasury and ALM departments, Compliance and regulatory reporting teams
Does this circular change the current CRR rate?
No. The CRR rate remains at 5% of demand and time liabilities. Only the statutory minimum floor of 3% has been removed.
Which liabilities are exempt from CRR under this circular?
Liabilities to the banking system in India, credit balances in ACU (US$) accounts, CBLO transactions with CCIL, and demand/time liabilities of Offshore Banking Units (OBUs).
When did these changes take effect?
Both the removal of the 3% floor and the continuation of exemptions are effective from June 22, 2006.