What changed
The Cash Reserve Ratio (CRR) for Scheduled Primary (Urban) Co-operative Banks was increased by 50 basis points from the previous level to 7.00%. The new rate applies from the fortnight starting August 4, 2007, superseding the earlier notification of April 24, 2007.
What it means for you
Urban co-operative banks must now set aside a higher proportion of their demand and time liabilities as reserves with RBI, reducing lendable resources. This move aims to absorb excess liquidity and manage inflationary pressures, impacting net interest margins for these banks.
What you must do
- Recalculate CRR maintenance for the fortnight beginning August 4, 2007, at 7.00% of total demand and time liabilities.
- Ensure compliance with the revised CRR and acknowledge receipt of the circular to RBI.
- Review liquidity buffers and adjust lending or investment strategies to accommodate the higher reserve requirement.
Who it affects
Scheduled Primary (Urban) Co-operative Banks, Treasury and ALM teams of urban co-operative banks, RBI's Department of Banking Supervision (urban co-op banks)
What is the new CRR rate for urban co-operative banks?
The CRR has been increased to 7.00% of total demand and time liabilities, effective from the fortnight beginning August 4, 2007.
Why did RBI increase the CRR?
RBI cited a review of the current liquidity situation as the reason for the 50 bps hike, indicating a need to tighten monetary conditions.
Does this circular apply to all urban co-operative banks?
It applies specifically to Scheduled Primary (Urban) Co-operative Banks, as defined under Section 42(1) of the RBI Act, 1934.