Indian The Reserve Bank of India (RBI) on Friday made it mandatory for banks to maintain at least 99 percent of the mandatory amount of Cash Reserve Ratio (CRR) on a daily basis. At present this limit is 90 percent. RBI said in a statement that the new rule will come into effect from October 16, 2026. The Reserve Bank of India, after reviewing the current liquidity situation in the banking system, has decided to increase the daily mandatory limit of CRR for banks from 90 percent to 99 percent.
What is Cash Reserve Ratio (CRR)
At present, scheduled banks are required to maintain at least 90 per cent of the mandatory cash reserve ratio on every day of the fortnight. However, the average of the cash reserve ratio maintained on daily basis during the entire fortnight should not be less than the mandatory ratio prescribed by the Reserve Bank of India. Cash Reserve Ratio (CRR) is the minimum amount that banks are required to keep in cash with the RBI as a certain percentage of their total deposits.
Excess cash of about Rs 3.88 lakh crore in the banking system
Increasing the mandatory limit of CRR on daily basis will impact the management of cash available with banks. Let us tell you that till October 8, there was excess cash of about Rs 3.88 lakh crore in the country’s banking system. The Reserve Bank of India has been taking several measures, including Variable Rate Reverse Repo (VRRR) auctions, to reduce this excess cash over the past two months. Earlier this week, RBI Governor Sanjay Malhotra had said that the excess cash situation would be eliminated by the end of financial year 2026-27. However, he said increasing CRR was the least preferred option.
Where and how did excess cash come into the banking system?
The excess liquidity in the banking system came mainly from the banks raising foreign currency non-resident (bank) i.e. FCNR (B) deposits. These deposits brought foreign exchange into the system, while banks subsequently received rupee cash from swaps made with the RBI. Additionally, government spending, including payment of salaries and pensions, also increased liquidity in the banking system at the end of the month.
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SK Sharma is a content writer who writes on news, entertainment, and lifestyle topics. She has over four years of experience and is known for conveying information in simple and clear language.
