RBI raises daily CRR maintenance requirement for banks to 99% starting October 16

The Reserve Bank of India announced that commercial lenders must maintain 99 per cent of their required cash reserve ratio daily starting October 16, moving up from the previous 90 per cent threshold. The directive aims to restrict day-to-day operational buffers and absorb surplus funds sloshing through the domestic banking network.

While the headline cash reserve ratio stays unchanged at 3 per cent, the shift curtails the operational flexibility banks previously possessed. Lenders can no longer draw down their reserve balances as heavily on individual days, compelling institutions to lock away a larger fraction of deposits with the central bank on a daily basis.

Banking system liquidity stood at ₹3.88 lakh crore as of October 8, driven by foreign currency non-resident bank deposit mobilization and government expenditure. Although surplus liquidity has moderated from earlier peaks, the central bank has moved aggressively to align overnight money market rates with the policy repo rate.

Market participants noted that overnight borrowing rates dropped below the policy rate due to abundant liquidity. Treasury executives indicated that the tighter reserve rule will force banks to secure more regular funding, pushing the weighted average call rate closer to the 5.50 per cent repo rate.

The central bank also scheduled an open market operation sale of government securities worth ₹25,000 crore for October 13. Together, the bond auction and revised reserve mandate form a synchronized strategy to drain excess cash following the recent 25-basis-point rate increase.

Individual banks will experience varying impacts depending on their specific treasury profiles and liquidity cushions. Institutions operating near historical reserve floors are expected to adjust their daily cash management protocols immediately to avoid potential shortfalls under the stricter framework.