With the Reserve Bank of India (RBI) asking Banks to temporarily maintain incremental cash reserve ratio (I-CRR), there could be tighter liquidity conditions in the banking system, leading to some upward pressure on both credit and deposit rates.
With effect from the fortnight beginning August 12, scheduled banks have to maintain an incremental cash reserve ratio (I-CRR) of 10 per cent on the increase in their net demand and time liabilities (NDTL) between May 19 and July 28. This measure is to suck out excess liquidity from the banking system. CRR is the cash parked by the banks in their specified current account maintained with the RBI.
RBI Governor Shaktikanta Das said this could imply a little over ₹1-lakh crore of liquidity being impounded. The total liquidity in the system (government balances + Liquidity Adjustment Facility/LAF) stood close to ₹3.5-lakh crore, with the LAF balance at ₹2 lakh crore as of August 8, per HDFC Bank’s Economic Research team said in a note.
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