RBI introduces incremental CRR to manage excess liquidity in banking system

Posted on:28 Nov 2016 09:23:31
RBI introduces incremental CRR to manage excess liquidity in banking system
28 November 2016 Current Affairs: The Reserve Bank of India (RBI) has introduced an incremental Cash Reserve Ratio (CRR) of 100% for fortnight to absorb excess liquidity in the banking system following demonetisation. 

CRR is the proportion of deposits that banks have to keep as cash with the RBI (or the central bank). Banks do not earn any interest on CRR balances kept with the RBI.

Banks have to maintain 100% CRR for incremental deposits they received between September 16, 2016 and November 11, 2016. The incremental CRR requirement will be temporary measure and it is within RBI’s ‘liquidity management framework’. 

However, overall CRR requirement will stay at 4%. The incremental CRR will be reviewed on December 9, 2016 or even earlier.

After Union Government announced demonization of old Rs. 500 and Rs. 1,000 notes on November 8, 2016, banks started depositing and exchanging those notes. 

The deposits in banks had swelled by Rs.3.24 lakh crore between September 16 and November 11, 2016.  The last fortnight of September 2016 saw deposit mobilisation jump by Rs.3.5 lakh crore.

It is intended to absorb a part of the surplus liquidity arising from the return of specified bank notes to the banking system. 

Thus, it leaves adequate liquidity with banks to meet the credit needs of the productive sectors of the economy It will only have a marginal impact on bank’s cost of funds since it was a temporary measure.

 

Monthly Current Affairs

Current Affairs Section

Daily Current Affairs Quiz

Subscribe to Current Affairs

Enter your email to get daily current affairs

Current Affairs September 2017

26 SEPTEMBER
NEWS
25 SEPTEMBER
NEWS
23 SEPTEMBER
NEWS
22 SEPTEMBER
NEWS

Current Affairs August 2017

31 AUGUST
NEWS
30 AUGUST
NEWS
29 AUGUST
NEWS
28 AUGUST
NEWS

Current Affairs July 2017

31 JULY
NEWS
29 JULY
NEWS
28 JULY
NEWS
27 JULY
NEWS