What changed
RBI further reduced CRR for Urban Co-operative Banks by 100 basis points from 7.5% to 6.5% of NDTL, effective from the reporting fortnight beginning October 11, 2008. This is in addition to the 150 bps cut announced on October 10, 2008, bringing the total reduction to 250 bps from the earlier 9%.
What it means for you
Urban Co-operative Banks now need to hold less cash with RBI, freeing up funds for lending or investment. This aggressive CRR cut signals RBI's intent to inject liquidity into the banking system amid evolving tight conditions. For these banks, lower CRR directly improves their lendable resources and profitability.
What you must do
- Recalculate CRR maintenance at 6.5% of NDTL for the current fortnight starting October 11, 2008.
- Adjust liquidity management strategies to deploy freed-up funds optimally.
- Acknowledge receipt of this circular to RBI as instructed.
- Monitor further RBI communications on liquidity measures.
Who it affects
All Scheduled Primary (Urban) Co-operative Banks, Treasury and ALM teams at Urban Co-operative Banks, RBI's Department of Banking Supervision (UBD)
How much total CRR cut has been implemented in October 2008?
A total reduction of 250 basis points: 150 bps on October 10, 2008 (from 9% to 7.5%), and an additional 100 bps effective from the fortnight beginning October 11, 2008 (from 7.5% to 6.5%).