What changed
The CRR for all Regional Rural Banks was increased by half a percentage point of their net demand and time liabilities. The hike is implemented in two stages: first to 5.75% effective from the fortnight beginning February 17, 2007, and then to 6.00% effective from the fortnight beginning March 3, 2007.
What it means for you
RRBs will need to hold more funds with RBI as reserves, reducing lendable resources. This move aims to absorb excess liquidity and curb inflationary pressures. Banks must adjust their asset-liability management to meet the higher reserve requirement without breaching statutory norms.
What you must do
- Recalculate your NDTL for the fortnights starting Feb 17 and Mar 3 to ensure CRR maintenance at 5.75% and 6.00% respectively.
- Review liquidity buffers and adjust short-term borrowing or investment plans to accommodate the incremental reserve requirement.
- Update internal systems and reporting processes to reflect the revised CRR rates for RRBs.
- Communicate the change to treasury and operations teams to avoid any default in CRR compliance.
Who it affects
All Regional Rural Banks (RRBs), Treasury departments of RRBs, Compliance and risk management teams at RRBs
What is the new CRR for RRBs after this circular?
The CRR is increased to 5.75% of NDTL from the fortnight beginning February 17, 2007, and further to 6.00% from the fortnight beginning March 3, 2007.
Why is RBI raising CRR for RRBs?
The circular does not specify reasons, but such hikes are typically used to absorb excess liquidity and manage inflation. The decision was announced via a press release dated February 13, 2007.
Does this circular apply to all RRBs uniformly?
Yes, the circular is addressed to 'All Regional Rural Banks' and applies uniformly to all RRBs covered under Section 42(1) of the RBI Act, 1934.