CRR Hiked by 50 bps in Two Stages from April 2007

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As set out in Press Release: 2006-2007/1336 dated March 30, 2007 , it has been decided to increase Cash Reserve Ratio (CRR) of Scheduled Commercial Banks by one-half of one percentage point of their Net Demand and Time Liabilities (NDTL) in two stages, effective from the fortnights as indicated below: Effective date (i.e., the fortnight beginning from) CRR on net demand and time liabilities (per cent) April 14,2007 6.25 April 28,2007 6.50 However, the effective CRR maintained by Scheduled Commercial Banks on total demand and time liabilities shall not be less than 3.00 per cent, as stipulated under the Reserve Bank of India Act, 1934. 2. A copy of the relevant notification DBOD.No. Ret. BC. 73 /12.01.001/2006-2007 dated April 04, 2007 is enclosed. 3. Interest on eligible cash balances for CRR At present, all Scheduled Commercial Banks are paid interest at the rate 1.00 percent on eligible cash balances maintained with Reserve Bank of India under proviso to Section 42 (1) and 42 (1A) of the Reserve Bank of India Act, 1934. It has now been decided that with effect from the fortnight beginning April 14, 2007, the Scheduled Commercial Banks will be paid interest at the rate of 0.50 per cent per annum on eligible cash balances maintained with the Reserve Bank of India under current CRR requirement. Please acknowledge receipt. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2006-2007/305 · issued 04 Apr 2007. The plain-English explanation above is BankPulse’s own independent summary.

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