In order to absorb the surge in liquidity in banking system following demonetisation of high value notes, the Reserve Bank introduced an incremental Cash Reserve Ratio of 100 per cent for the fortnight which began yesterday. <br/><br/>CRR is the portion of the deposits which banks are required to park to the RBI. Currently it is at 4 per cent. As per the RBI guidelines, on the increase in NDTL, Net Demand and Time Liabilities between September 16 and November 11, scheduled banks shall maintain an incremental CRR of 100 per cent, effective the fortnight beginning November 26, 2016. As per the estimates, this could be 3.5 lakh crore rupees.<br/><br/>RBI said, it will review the decision on December 9 or earlier as the incremental CRR is intended to be a temporary measure within RBI's liquidity management framework to drain excess liquidity in the system. <br/><br/>The regular CRR would however continue to be at 4 per cent. RBI observed that the magnitude of surplus liquidity available with the banking system is expected to increase further in the fortnights ahead. <br/><br/>In view of this, it has been decided to absorb a part of this surplus liquidity by applying an incremental CRR as a purely temporary measure.<br/><br/>RBI stated that this move is intended to absorb a part of the surplus liquidity arising from the return of now defunct 500/1000 rupees notes to the banking system, while leaving adequate liquidity with banks to meet the credit needs of the productive sectors of the economy. <br/><br/>This measure should also facilitate banks' compliance with the incremental CRR. The central bank said in view of the problem of mounting deposits it has decided to revive the Guarantee Scheme wherein banks can deposit the notes directly with the offices of RBI under whose jurisdiction they are located.

In order to absorb the surge in liquidity in banking system following demonetisation of high value notes, the Reserve Bank introduced an incremental Cash Reserve Ratio of 100 per cent for the fortnight which began yesterday. <br/><br/>CRR is the portion of the deposits which banks are required to park to the RBI. Currently it is at 4 per cent.<br/><br/>As per the RBI guidelines, on the increase in NDTL, Net Demand and Time Liabilities between September 16 and November 11, scheduled banks shall maintain an incremental CRR of 100 per cent, effective the fortnight beginning November 26, 2016. As per the estimates, this could be 3.5 lakh crore rupees.<br/><br/>RBI said, it will review the decision on December 9 or earlier as the incremental CRR is intended to be a temporary measure within RBI's liquidity management framework to drain excess liquidity in the system. <br/><br/>The regular CRR would however continue to be at 4 per cent. RBI observed that the magnitude of surplus liquidity available with the banking system is expected to increase further in the fortnights ahead. <br/><br/>In view of this, it has been decided to absorb a part of this surplus liquidity by applying an incremental CRR as a purely temporary measure.<br/><br/>RBI stated that this move is intended to absorb a part of the surplus liquidity arising from the return of now defunct 500/1000 rupees notes to the banking system, while leaving adequate liquidity with banks to meet the credit needs of the productive sectors of the economy. <br/><br/>This measure should also facilitate banks' compliance with the incremental CRR. The central bank said in view of the problem of mounting deposits it has decided to revive the Guarantee Scheme wherein banks can deposit the notes directly with the offices of RBI under whose jurisdiction they are located.

In order to absorb the surge in liquidity of banking system following the demonetisation of high value notes, the Reserve Bank introduced an incremental Cash Reserve Ratio of 100 per cent for the fortnight since yesterday.<br/><br/> CRR is the portion of the deposits which banks are required to park to the RBI. Currently it is at 4 per cent. RBI said it will review the decision on 9th of December or earlier. <br/><br/>The incremental CRR is intended to be a temporary measure within RBI's liquidity management framework to drain excess liquidity in the system. The regular CRR would however continue to be at 4 per cent.