What changed
The Cash Reserve Ratio for Regional Rural Banks was increased by 25 basis points, from 8.00% to 8.25% of net demand and time liabilities. This change takes effect from the fortnight beginning May 24, 2008, superseding the previous notification dated April 21, 2008.
What it means for you
RRBs will need to hold an additional 0.25% of their deposits as reserves with RBI, reducing lendable resources. This move tightens liquidity in the rural banking sector, potentially impacting credit growth and profitability for RRBs. Banks must adjust their asset-liability management to comply with the higher requirement.
What you must do
- Recalculate CRR requirement based on 8.25% of net demand and time liabilities for the fortnight starting May 24, 2008.
- Ensure adequate liquidity to maintain the higher CRR without defaulting on reserve maintenance.
- Update internal systems and reporting processes to reflect the revised CRR rate.
- Communicate the change to treasury and operations teams for smooth implementation.
Who it affects
All Regional Rural Banks in India, Treasury departments of RRBs, RBI's Rural Planning and Credit Department
When does the new CRR of 8.25% become effective?
The revised CRR applies from the fortnight beginning May 24, 2008.
What is the basis for calculating the CRR?
The CRR is calculated as a percentage of the bank's net demand and time liabilities (NDTL).
Why was the CRR increased for RRBs?
The increase was part of RBI's review of the evolving liquidity situation, as announced in the Governor's Annual Policy statement for 2008-09.