Reserve Bank of India (RBI) on Friday 8 said it had decided to discontinue the Incremental Cash Reserve Ratio (I-CRR) in a phased manner. 

“On a review, it has been decided to discontinue the I-CRR in a phased manner,” the central bank said in a press release. 

The central bank said that the amounts impounded under the I-CRR would be released in stages so that system liquidity is not subjected to sudden shocks and money markets function in an orderly manner. 

The central bank will release 25 per cent of the I-CRR maintained on September 9, 2023.  Another 25 per cent will be released on September 23, 2023. The rest 50 per cent of the I-CRR maintained will be released on October 7, 2023.

RBI had earlier said that banks had to maintain a 10 per cent I-CRR from August 12 as a part of the central bank’s efforts to drain excess liquidity from the banking system following the withdrawal of the Rs 2,000 currency note.

Further, RBI Governor Shaktikanta Das highlighted that the central bank considered imposition of I-CRR desirable in interest of financial and price stability and banks would have enough liquidity to do their lending operations. 

“The incremental CRR was considered necessary in the background of the liquidity overhang. We considered it desirable in interest of financial and price stability. It will have an impact on inflation also. It is a purely temporary measure,” Mr Das said.