What changed
The CRR for RRBs was cut by 50 basis points, from 5.50% to 5.00% of net demand and time liabilities. The change takes effect from the fortnight beginning January 17, 2009, as per the notification dated January 5, 2009.
What it means for you
RRBs will have lower statutory reserve requirements, releasing funds for lending or investment. This is a counter-cyclical measure to support rural credit flow during the 2008-09 financial crisis. Banks should adjust their liquidity management and NDTL calculations accordingly.
What you must do
- Recalculate CRR maintenance at 5.00% of NDTL from the January 17, 2009 fortnight.
- Update internal systems and reporting templates to reflect the reduced CRR rate.
- Acknowledge receipt of this circular to your respective RBI Regional Office.
- Monitor liquidity position to deploy freed-up funds optimally.
Who it affects
All Regional Rural Banks (RRBs), RBI's Rural Planning and Credit Department (RPCD), Treasury and compliance teams at RRBs
When does the reduced CRR become effective?
The new CRR of 5.00% applies from the fortnight starting January 17, 2009.
What was the previous CRR for RRBs before this cut?
The earlier CRR was 5.50% of NDTL, as set in the November 3, 2008 circular.
Why did RBI reduce the CRR for RRBs?
RBI cited a review of global and domestic macroeconomic conditions, as mentioned in its January 2, 2009 press release, to ease liquidity.