The Reserve Bank of India raised scheduled banks’ minimum daily cash reserve ratio maintenance from 90% to 99%, effective from the fortnight beginning 16 October. Separately, it will sell six Indian government securities for an aggregate ₹25,000 crore on 13 October. The central bank announced both steps after reviewing current and evolving liquidity conditions. The measures tighten day-to-day bank liquidity without changing the prescribed CRR itself, which remains 3%.
The decisions came two days after the RBI increased its policy repo rate by 25 basis points to 5.50% and shifted its stance to calibrated tightening. Governor Sanjay Malhotra said after that meeting that the banking system’s liquidity surplus was temporary and should be substantially absorbed during the financial year ending in March. Reuters reported that surplus liquidity had averaged more than ₹7 trillion a day since 1 September, equal to about 2.6% of deposits. The RBI sold ₹1 trillion of government bonds in September as part of the same effort to withdraw excess cash.
LIQUIDITY RULE REDUCES DAILY FLEXIBILITY
Scheduled banks must maintain the prescribed CRR on average over each reporting fortnight. The previous rule allowed their daily balance to fall to 90% of the requirement, provided the fortnightly average was met. Raising that floor to 99% sharply narrows the room for banks to vary reserve balances from one day to another.
Banks currently place 3% of their deposits with the RBI under the CRR and receive no interest on those funds. The new threshold means each bank must hold at least 99% of its required reserve balance every day; it does not require banks to reserve 99% of deposits. The tighter daily rule could support transmission of the RBI’s higher policy rate by limiting banks’ flexibility to deploy surplus cash.
AUCTION EXTENDS OPEN-MARKET SALES
The OMO auction covers six government securities maturing from March 2030 to April 2034, with no security-specific amount announced. Bids will be accepted through the RBI’s E-Kuber system from 9:30am to 10:30am on 13 October using a multiple-price method. The result is due the same day, and successful bidders must make funds available by noon on 14 October.
The next concrete milestones are the auction result on 13 October and the start of the higher daily reserve-maintenance requirement on 16 October. Their effect will be visible in the amount of bonds sold, banking-system liquidity and overnight money-market rates after implementation.