RRBs: CRR Exemption on Select Liabilities Withdrawn

What changed

RBI has withdrawn its earlier circular dated June 22, 2006 that had granted exemption to RRBs from maintaining average CRR on certain categories of liabilities. The new circular, effective March 2, 2007, reinstates the exemption but only for liabilities to the banking system and CBLO transactions with CCIL, while requiring all RRBs to maintain a minimum CRR of 3% on total demand and time liabilities.

What it means for you

RRBs must now ensure they maintain at least 3% CRR on their entire demand and time liabilities, even though they are exempt from average CRR on inter-bank and CBLO liabilities. This change tightens liquidity management for RRBs, as the earlier blanket exemption has been replaced with a narrower exemption tied to a statutory floor. Banks need to adjust their reserve calculations to comply with the new minimum requirement.

What banks were required to do at the time

• Review your RRB's current CRR maintenance practices to ensure compliance with the 3% statutory minimum on total demand and time liabilities.
• Update internal systems to exclude only inter-bank liabilities and CBLO transactions from average CRR calculations, as per the revised exemption.
• Acknowledge receipt of this circular to your respective RBI Regional Office as instructed.
• Train treasury and compliance teams on the revised CRR exemption scope to avoid any shortfall in reserve maintenance.

Who it affects

All Regional Rural Banks (RRBs), Treasury departments of RRBs, Compliance officers at RRBs, RBI regional offices overseeing RRBs