The Reserve Bank of India (RBI) has declared its intention to gradually phase out the incremental cash reserve ratio (I-CRR) mandate imposed on banks, with completion slated for October 7. According to the RBI, 25% of the I-CRR funds will be released on September 9, another 25% on September 23, and the remaining portion on October 7.
In its statement, the RBI clarified that this decision was made after evaluating current and evolving liquidity conditions. The staged release of funds from the I-CRR is aimed at preventing abrupt shocks to the system’s liquidity and ensuring the orderly functioning of money markets.
Previously, in August, the RBI had directed banks to maintain an I-CRR of 10% on the rise in deposits between May 19 and July 28, effectively withdrawing over 1 trillion rupees ($12.02 billion) from the banking system’s liquidity.
Earlier this week, Reuters reported, citing insider sources, that market participants anticipated the RBI’s continued use of the I-CRR, possibly with some adjustments to the ratio. It was expected that the ratio might be reduced to a range between 5% and 8% in preparation for twin tax outflows due over the next two weeks.
 has declared its intention to gradually phase out the incremental cash reserve ratio (I-CRR) mandate imposed){kind=link}