What changed
The statutory minimum CRR of 3% on total demand and time liabilities for Scheduled Primary (Urban) Co-operative Banks was abolished following the RBI (Amendment) Act 2006. RBI now has the power to set CRR without any floor or ceiling. The CRR rate stays at 5%, but the existing exemptions for interbank liabilities and CBLO transactions continue.
What it means for you
Banks no longer have a statutory floor on CRR, giving RBI full flexibility to adjust reserve requirements for monetary policy. For UCBs, the 5% CRR remains unchanged, but exempted categories (interbank and CBLO) reduce the effective reserve burden. This simplifies compliance and aligns UCBs with the broader scheduled banking framework.
What you must do
- Continue maintaining CRR at 5% of total demand and time liabilities as per existing circular.
- Exclude liabilities to the banking system and CBLO transactions with CCIL from CRR computation.
- Update internal CRR calculation systems to reflect removal of the 3% statutory minimum floor.
- Review the enclosed notification (UBD PCB No. 13276/2005-2006) for legal reference and audit readiness.
Who it affects
Scheduled Primary (Urban) Co-operative Banks, Treasury and compliance teams at UCBs, RBI's Department of Banking Supervision (urban co-operative banks)
Does this circular change the current CRR rate for UCBs?
No. The CRR rate remains at 5% of demand and time liabilities. Only the statutory minimum floor of 3% has been removed, giving RBI discretion to set CRR without a floor or ceiling.
Which liabilities are exempt from CRR under this notification?
Two categories: (i) liabilities to the banking system in India as defined under Section 42(1) of the RBI Act, and (ii) transactions in CBLO with the Clearing Corporation of India Ltd. (CCIL).
When did these changes take effect?
The amendment to Section 42 and the notification came into force on June 22, 2006, the same date as the circular.