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RBI raises daily CRR maintenance floor to 99%, plans OMO sale

By CAShorts DeskPublished Updated Sources: RBI circular and press releases of October 9, 2026; Business Standard

RBI raises daily CRR maintenance floor to 99%, plans OMO sale
Illustration (AI-generated)

The Reserve Bank of India on October 9, 2026 raised the minimum daily maintenance of the Cash Reserve Ratio from 90% to 99% of the requirement, effective from the fortnight beginning October 16. It will also sell government securities worth ₹25,000 crore through an open market operation on October 13 to absorb surplus liquidity.

Syllabus: GS3 · Indian Economy & Growth; Prelims · Current Affairs & IR; Prelims · Economy & Social Development

Why it matters

A bank's treasury could so far keep as little as 90% of its required cash with the RBI on a given day and lend the rest overnight, as long as the fortnight's average came out right. From October 16 almost the whole requirement stays locked up every day. With less spare cash chasing borrowers in the overnight market, the call rate should climb towards the repo rate. Borrowers and savers feel this, because a rate hike reaches loan and deposit rates only when market rates follow it. A senior banker at a state-owned bank said the effect may be limited, since banks generally keep more than 95% anyway. The larger question is how a central bank makes its policy rate count when banks are flush with money.

Prelims pointers

  • Cash Reserve Ratio: share of net demand and time liabilities a bank keeps as cash with the RBI; no interest is paid on it.
  • Section 42(1) of the Reserve Bank of India Act, 1934: scheduled banks maintain CRR as an average daily balance with the RBI.
  • Scheduled bank: a bank included in the Second Schedule to the Reserve Bank of India Act, 1934.
  • Statutory Liquidity Ratio: kept by the bank itself in cash, gold or approved securities under Section 24 of the Banking Regulation Act, 1949.
  • Weighted average call rate: the operating target of monetary policy; call money is uncollateralised overnight lending among banks.
  • LAF corridor: the Standing Deposit Facility rate is the floor, the repo rate the policy rate and the Marginal Standing Facility rate the ceiling.
  • Open market operation: the RBI's sale of government securities absorbs liquidity; its purchase injects liquidity.
  • Variable rate reverse repo: banks bid the rate at which they park money with the RBI for a fixed number of days.

Practise a UPSC-style question

With reference to the Cash Reserve Ratio (CRR) in India, consider the following statements:

1. Scheduled banks maintain it under Section 42(1) of the Reserve Bank of India Act, 1934.

2. The Reserve Bank of India pays no interest on the balances that banks keep under it.

3. Banks keep it with themselves in the form of cash, gold or approved securities.

Which of the statements given above is/are correct?

  1. (a) 1 and 2 only
  2. (b) 2 and 3 only
  3. (c) 1 and 3 only
  4. (d) 1, 2 and 3
Show the answer

Answer: (a) 1 and 2 only

1 is correct: Section 42(1) of the Reserve Bank of India Act, 1934 requires scheduled banks to keep an average daily balance with the RBI. 2 is correct: CRR balances earn no interest. 3 is incorrect: CRR is kept as cash with the RBI; cash, gold and approved securities held by the bank itself make up the Statutory Liquidity Ratio.

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