What changed
Earlier on October 7, 2008, RBI had announced a 50 bps CRR reduction from 9.00% to 8.50% for these banks. Now, based on a review of liquidity conditions, the reduction has been deepened to 150 bps, bringing CRR down to 7.50% of NDTL, effective from the same fortnight starting October 11, 2008.
What it means for you
Urban co-operative banks will have to hold less cash with RBI, freeing up significant funds for lending or other deployment. This aggressive easing signals RBI's concern over tight liquidity and should help these banks manage their cash flows better. However, the move is specific to scheduled primary urban co-operative banks and does not apply to other bank categories.
What you must do
- Recalculate your CRR maintenance for the fortnight beginning October 11, 2008, using the new 7.50% rate on NDTL.
- Update internal systems and reporting templates to reflect the revised CRR requirement.
- Communicate the change to your treasury and operations teams to ensure compliance from the effective date.
- Monitor liquidity position to optimize deployment of released funds.
Who it affects
Scheduled Primary (Urban) Co-operative Banks, Treasury departments of these banks, Compliance and operations teams handling CRR maintenance
What is the new CRR rate for Scheduled Primary (Urban) Co-operative Banks?
The CRR has been reduced by 150 basis points from 9.00% to 7.50% of net demand and time liabilities (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 in the context of global and domestic developments and decided a larger cut was needed to ease liquidity conditions.
Does this CRR reduction apply to all banks?
No, this notification specifically applies only to Scheduled Primary (Urban) Co-operative Banks. Other bank categories are not covered by this circular.