Banks are required to maintain an additional CRR of 10% on NDTL growth, the Repo rate remains unchanged

The Monetary Policy Committee (MPC) met on the 8th, 9th, and 10th of August 2023decided unanimously to keep the policy repo rate at 6.50 percent, and other key policy rates also remain unchanged.

Under Section 42(1) of the Reserve Bank of India Act, 1934, all Scheduled Banks are required to maintain with the Reserve Bank of India a Cash Reserve Ratio (CRR) of 4.50 percent of Net Demand and Time Liabilities (NDTL). However, on a review, the central bank decided that effective from the fortnight beginning August 12, 2023, an incremental CRR (I-CRR) of 10 percent on the increase in NDTL between May 19, 2023, and July 28, 2023.   I-CRR will be reviewed on September 8, 2023, or earlier, the statement said. The above requirement is applicable to all Scheduled Commercial Banks / Regional Rural Banks / All Scheduled Primary (Urban) Co-operative Banks / All Scheduled State Co-operative Banks.

RBI Governor in his statement informed that the central bank is proposing to put in place a transparent framework for reset of interest rates on floating-interest loans. He also stated that the Transaction limit of UPI Lite raised to ₹500 from ₹200. He declared that UPI to launch Conversational Payment and also to introduce offline payments using Near Field Communication (NFC) technology.  

The current reserve ratios and policy rates which remain unchanged are as under.

*SDF is the new floor for policy rates introduced by RBI in April 2022, as a mechanism to curb inflation by absorbing liquidity. The SDF rate is applied for which banks park their excess funds with the RBI without any collateral. Although, the earlier system of reverse repo rate will remain as part of RBI’s toolkit and its operation will be at the discretion of the RBI for purposes specified from time to time, according to RBI’s announcement. This move of RBI makes the reverse repo rate redundant for now.