What changed
The Cash Reserve Ratio for Regional Rural Banks was increased by 25 basis points from the previous level to 9.00% of net demand and time liabilities. This change takes effect from the fortnight starting August 30, 2008, superseding the earlier CRR notification of June 26, 2008.
What it means for you
RRBs will need to park an additional 0.25% of their deposits with RBI, reducing lendable resources and squeezing net interest margins. This tighter liquidity measure signals RBI's intent to curb inflation and absorb excess liquidity from the banking system, impacting RRBs' profitability and credit growth.
What you must do
- Recalculate your CRR requirement at 9% of NDTL for the fortnight from August 30, 2008.
- Ensure adequate SLR and cash buffers to meet the higher reserve requirement without penalty.
- Review loan disbursement and deposit mobilization strategies to manage liquidity impact.
- Update internal systems and reporting templates to reflect the revised CRR rate.
Who it affects
All Regional Rural Banks, RRB treasury and ALM teams, RRB branch operations and credit departments
What is the new CRR rate for RRBs and when does it apply?
The CRR for RRBs is increased to 9.00% of net demand and time liabilities, effective from the fortnight beginning August 30, 2008.
Why did RBI increase CRR for RRBs?
The hike is part of the First Quarter Review of Annual Monetary Policy 2008-09, aimed at managing current liquidity conditions and controlling inflation.
Does this circular replace the earlier CRR notification?
Yes, this notification partially modifies the earlier circular dated June 26, 2008, and sets the new CRR at 9%.