RBI Governor Shaktikanta Das on Wednesday announced that the Central Bank has decided to increase the cash reserve ratio (CRR) by 50 basis points to 4.5 per cent of net demand and time liabilities (NDTL), effective from the fortnight beginning May 21, 2022.
“ in keeping with the stance of withdrawal of accommodation and in line with the earlier announcement of gradual withdrawal of liquidity over a multi-year time frame, it has been decided to increase the cash reserve ratio (CRR) by 50 basis points to 4.5 per cent of net demand and time liabilities (NDTL), effective from the fortnight beginning May 21, 2022” he said during his Governor’s statement pursuant to an off-cycle meeting on 2nd and 4th May 2022 to reassess the evolving inflation-growth dynamics and the impact of the developments after the MPC meeting of April 6-8, 2022. The withdrawal of liquidity through this increase in the CRR would be of the order of ₹87,000 crores, he added.
CRR has been hiked to 4.5% from 4%, now taking it above the pre-pandemic level when it was reduced to 3% as part of the central bank’s efforts to support the economy due to the pandemic and subsequently raised to 3.5% in 2021. In his statement governor, Shaktikanta Das said the hike in CRR was to ensure, liquidity conditions are “modulated in line with the policy action.”
As analysts said the CRR hike together with the repo rate hike will ensure that the overnight rates are closer to the repo rate.