What changed
RBI lowered the Cash Reserve Ratio (CRR) for Scheduled Primary (Urban) Co-operative Banks by 50 basis points, bringing it down to 8.50% of net demand and time liabilities. The change takes effect from the fortnight beginning October 11, 2008, and is explicitly temporary, subject to ongoing review based on liquidity conditions.
What it means for you
This CRR reduction releases additional funds for urban co-operative banks, improving their liquidity position during a period of global financial turmoil. Banks can now deploy a slightly larger share of deposits for lending or other purposes, though the relief is intended as a short-term measure and may be reversed as conditions evolve.
What you must do
- Recalculate your CRR maintenance for the fortnight starting October 11, 2008, using the new 8.50% rate on NDTL.
- Monitor RBI announcements closely as this is a temporary measure subject to continuous review.
- Assess the impact on your liquidity position and adjust short-term asset-liability management accordingly.
Who it affects
All Scheduled Primary (Urban) Co-operative Banks, Treasury and ALM teams of these banks, Depositors and borrowers of urban co-operative banks
What is the new CRR rate for urban co-operative banks?
The CRR has been reduced from 9.00% to 8.50% of net demand and time liabilities (NDTL), effective from the fortnight beginning October 11, 2008.
Is this CRR cut permanent?
No, the circular explicitly states this measure is ad hoc and temporary in nature, and will be reviewed continuously based on evolving liquidity conditions.