What changed
RBI revised its earlier October 6, 2008 circular that had reduced CRR by 50 bps to 8.50%. The new notification increased the reduction to 150 bps, bringing CRR down to 7.50% of NDTL, effective from the fortnight starting October 11, 2008.
What it means for you
Banks will have to maintain lower reserves against deposits, releasing substantial liquidity into the system. This move aims to ease funding pressures and support lending during the global financial crisis. Lenders can expect improved cash flow and potentially lower interbank rates.
What you must do
- Recalculate CRR maintenance for the fortnight beginning Oct 11, 2008, at 7.50% of NDTL.
- Update internal systems and reporting to reflect the revised CRR rate immediately.
- Communicate the change to treasury and operations teams to adjust liquidity management strategies.
- Monitor liquidity conditions and consider deploying freed-up funds for lending or investments.
Who it affects
All Scheduled Commercial Banks (excluding Regional Rural Banks), Treasury departments, Lending and credit teams, Compliance and reporting units
What is the new CRR rate and when does it take effect?
The CRR is reduced to 7.50% of NDTL, effective from the fortnight beginning October 11, 2008.
Why did RBI increase the CRR cut from 50 bps to 150 bps?
RBI reviewed the evolving liquidity situation amid global and domestic developments and decided a larger cut was needed to ease tight conditions.
Does this circular replace the earlier one from October 6, 2008?
Yes, this notification supersedes the earlier circular that had announced a 50 bps reduction.