RBI Imposes Higher Cash Reserve Ratio On Banks

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New Delhi: The Reserve Bank of India (RBI) asked banks to maintain an incremental cash reserve ratio of 100 per cent to absorb excess banking system liquidity after the government’s move to withdraw large denominated currency notes sparked a surge in bank deposits.

The central bank asked banks to maintain the incremental reserve ratio from the two-weekly cycle starting November 26, it said in a circular on Saturday.

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The RBI said the overall rate for the cash reserve ratio remained unchanged at 4 per cent.

The central bank said the move is “intended to be a temporary measure” and will be reviewed on December 9 or earlier.

To tackle the surge in banking system liquidity the central bank relaxed its liquidity auction rules by expanding its basket of securities that it accepts as collateral.

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