What changed
The CRR was increased from 4.00% to 4.50% of NDTL, a 50 bps hike. This change applies to all banks and takes effect from the reporting fortnight beginning May 21, 2022.
What it means for you
Banks must hold an additional 0.50% of their NDTL as reserves with RBI, draining liquidity from the system. This will compress net interest margins and reduce lendable resources, potentially slowing credit growth and raising lending rates.
What you must do
- Recalibrate liquidity buffers to meet the higher 4.50% CRR from May 21, 2022.
- Review asset-liability management to absorb the impact on net interest margins.
- Communicate revised lending rates to customers if pass-through is planned.
- Monitor deposit mobilization to offset the reserve requirement increase.
Who it affects
All scheduled commercial banks, Treasury and ALM teams, Credit and lending departments, Deposit pricing teams
When does the new CRR take effect?
The 4.50% CRR applies from the reporting fortnight beginning May 21, 2022.
What is the basis for calculating CRR?
CRR is calculated as a percentage of Net Demand and Time Liabilities (NDTL).
Does this apply to all banks?
Yes, the circular is addressed to all banks and the notification covers every bank under the RBI Act and Banking Regulation Act.