The Reserve Bank of India (RBI) has extended the relaxation relating to maintenance of cash reserve ratio (CRR) by all scheduled banks for a further period of three months up to September 25, 2020.
The central bank also extended the relaxation relating to enhanced borrowing limit for the aforementioned banks under the Marginal Standing Facility (MSF) scheme till September 30, 2020.
When it comes to CRR relaxation, Banks can continue to maintain minimum daily CRR balance of 80 per cent with the RBI.
CRR is the slice of deposits that banks have to maintain with the central bank. Currently, the CRR is at 3 per cent of a bank’s deposits.
The central bank, in its March 27 Developmental and Regulatory Policies Statement, had reduced the requirement of minimum daily CRR balance maintenance from 90 per cent to 80 per cent effective from the first day of the reporting fortnight beginning March 28, 2020. This one-time dispensation was initially available up to June 26, 2020.
The CRR dispensation has been given keeping in view the continuing hardships faced by banks in terms of social distancing of staff and consequent strains on reporting requirement, the RBI said.
CRR is the slice of deposits that banks have to maintain with the central bank. Currently, the CRR is at 3 per cent of a bank’s deposits.
MSF
On March 27, the RBI had announced an increase in the borrowing limit of scheduled banks under the MSF scheme, by dipping into the prescribed statutory liquidity (SLR), from 2 per cent to 3 per cent of their deposits outstanding at the end of the second preceding fortnight with immediate effect. This relaxation was available up to June 30, 2020.
So, following the extension in relaxation, Banks can continue to avail overnight liquidity up to 3 per cent of their respective deposits outstanding at the end of the second preceding fortnight at 4.25 per cent interest.
SLR is the slice of deposits that banks have to invest in government and state government securities. Currently, SLR is 18 per cent of a bank’s deposits.
