What changed
The Cash Reserve Ratio for scheduled primary urban co-operative banks was increased by 25 basis points from the previous level to 9.00% of net demand and time liabilities. The new rate applies from the fortnight beginning August 30, 2008, superseding the earlier June 26, 2008 notification.
What it means for you
Urban co-operative banks will need to park an additional 0.25% of their NDTL with RBI, reducing lendable resources and squeezing liquidity. This move signals RBI's intent to control inflation and absorb excess liquidity, impacting profitability for these banks in the short term.
What you must do
- Recalculate CRR requirement at 9% of NDTL for the fortnight starting August 30, 2008.
- Ensure adequate liquidity buffers to meet the higher reserve requirement without default.
- Review loan and investment portfolios to adjust for reduced deployable funds.
- Communicate the change to treasury and compliance teams for timely implementation.
Who it affects
Scheduled Primary (Urban) Co-operative Banks, Treasury departments of UCBs, Compliance officers at UCBs
What is the new CRR rate for urban co-operative banks?
The CRR has been increased by 25 basis points to 9.00% of net demand and time liabilities, effective from the fortnight beginning August 30, 2008.
Why did RBI increase the CRR for UCBs?
The hike was part of the First Quarter Review of Annual Monetary Policy 2008-09, based on a review of the current liquidity situation to tighten monetary conditions.
When does this CRR change take effect?
The new CRR of 9% applies from the fortnight starting August 30, 2008.