RBI to restore the cash reserve ratio in two phases to 4%

The Reserve Bank of India (RBI) has decided to gradually restore the cash reserve ratio (CRR) in two phases in a non-disruptive manner. This move is based on a review of monetary and liquidity conditions.

CRR, which is the slice of deposits that banks maintain with the RBI, will go up from 3 per cent to 3.5 per cent effective from March 27, 2021, and to 4.0 per cent effective from May 22, 2021.

To tide over the disruption caused by Covid-19, the CRR of all banks was reduced by 100 basis points to 3.0 per cent

for one year ending on March 26, 2021.

The RBI said the CRR normalisation opens up space for variety of market operations of the RBI to inject additional liquidity. Even as it announced restoration of CRR to 4 per cent, the central bank extended the relaxation in the marginal standing facility (MSF) for six more months – up to September 30, 2021 – to provide comfort to banks on their liquidity requirements.