RBI modifies norms on CRR exemption

Our Banking Bureau

Mumbai, Aug 8: The Reserve Bank of India (RBI) has modified guidelines on exemption for scheduled commercial banks from maintaining minimum statutory cash reserve ratio (CRR) requirement of 3 per cent only for term deposits and term borrowing liabilities. This exemption, for 15 days to one year’s time, will be effective from August 11.

Earlier, the RBI had exempted the scheduled commercial banks from maintaining CRR on all on inter-bank liabilities of 15 days and above.
The apex bank, in a circular dispatched to all schedule commercial banks, stated that only inter-bank term deposits or term borrowing liabililities of maturity of 15 days to one year period would be eligible for the CRR exemption. In effect, the RBI has now narrowed down the CRR exemption norm for the commercial banks. “This move will increase the cost of funds for the banks,” said a banker, adding that it will also force the banks to invite long-term deposits from other banks. However, the lending banks will now charge for that.”