What changed
The Cash Reserve Ratio (CRR) for scheduled commercial banks was increased by 25 basis points from 5.75% to 6.00% of net demand and time liabilities (NDTL). This change takes effect from the fortnight beginning April 24, 2010, as notified under Section 42(1) of the RBI Act, 1934.
What it means for you
Banks will need to park an additional 0.25% of their NDTL with RBI, reducing lendable resources and squeezing liquidity. This move aligns with RBI's monetary policy stance for 2010-11 aimed at curbing inflationary pressures, and may lead to higher lending rates or tighter credit conditions.
What you must do
- Recalculate CRR maintenance for the fortnight starting April 24, 2010 at 6% of NDTL.
- Ensure adequate liquidity buffers to meet the higher reserve requirement without breaching statutory minima.
- Review loan pricing and credit growth plans in light of reduced deployable funds.
- Update internal systems and reporting templates to reflect the revised CRR rate.
Who it affects
All scheduled commercial banks (excluding Regional Rural Banks), Treasury and asset-liability management teams, Credit and lending departments
When does the new CRR rate become effective?
The 6% CRR applies from the fortnight beginning April 24, 2010.
Which banks are covered by this circular?
All scheduled commercial banks except Regional Rural Banks (RRBs).
What is the legal basis for this CRR hike?
It is issued under Section 42(1) of the Reserve Bank of India Act, 1934.