What changed
The Cash Reserve Ratio (CRR) for Scheduled Primary (Urban) Co-operative 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 per the RBI notification dated April 21, 2010.
What it means for you
Urban co-operative banks will need to set aside a higher proportion of their deposits as reserves with RBI, reducing lendable resources. This move tightens liquidity in the banking system, potentially impacting loan growth and profitability for these banks. It reflects RBI's assessment of inflationary pressures and its policy stance to manage money supply.
What you must do
- Recalculate CRR maintenance for the fortnight starting April 24, 2010, using the new 6.00% rate on NDTL.
- Ensure adequate liquidity buffers to meet the increased reserve requirement without breaching statutory norms.
- Review loan disbursement and investment plans to align with reduced deployable funds.
- Update internal systems and reporting processes to reflect the revised CRR rate.
Who it affects
Scheduled Primary (Urban) Co-operative Banks, Treasury and ALM teams of UCBs, Compliance departments of UCBs
What is the new CRR rate for urban co-operative banks?
The CRR has been increased from 5.75% to 6.00% of net demand and time liabilities (NDTL), effective from the fortnight beginning April 24, 2010.
Why did RBI increase the CRR for UCBs?
The hike is based on RBI's current assessment and aligns with the monetary policy stance outlined in the April 20, 2010 Monetary Policy Statement, aimed at managing liquidity and inflation.
When does the new CRR requirement become effective?
It applies from the fortnight starting April 24, 2010, as per the notification dated April 21, 2010.