The Reserve Bank of India (RBI) has made a significant move, announcing the withdrawal of the Incremental Cash Reserve Ratio (I-CRR) starting October 7, 2023.
This decision comes after a month-long gradual reduction plan for the I-CRR was set in motion.
The I-CRR was initially introduced by RBI Governor in response to a surge in bank cash reserves following the discontinuation of the Rs 2000 note.
In a press release, the RBI clarified that the release of funds held under the I-CRR would occur in stages to facilitate a more efficient money market.
Starting from September 9, 2023, 25 percent of the I-CRR funds will be returned to the banking system.
On September 23, an additional 25 percent will be released, and finally, on October 7, 2023, the remaining 50 percent will be deposited back into the banking system.
The decision to impose the I-CRR had initially led to concerns about a cash shortage in banks, particularly as the festive season approached.
Consequently, banks had been advocating for its withdrawal. RBI’s move to end the I-CRR is aimed at enabling banks to offer more loans and meet the heightened demand for cash expected during the upcoming festive season.
