Demonetisation: RBI withdraws incremental increase in CRR

New Delhi: With the enhancement in the ceiling for issue of securities under the Market Stabilisation Scheme (MSS) to Rs 6,000 billion, the RBI on Wednesday decided to withdraw the incremental CRR effective the fortnight beginning December 10.

The liquidity released by the discontinuation of the incremental CRR would be absorbed by a mix of MSS issuances and liquidity adjustment facility (LAF) operations.

On November 26, 2016 the RBI had announced an incremental cash reserve ratio (CRR) of 100 percent of the increase in net demand and time liabilities (NDTL) of scheduled banks between September 16  and November 11 effective the fortnight beginning November 26.

The move was intended to absorb a part of the large increase in liquidity in the system following the withdrawal of the legal tender status of Rs 500 and Rs 1,000 denomination bank notes.

It was also indicated by the RBI that the incremental CRR was purely a temporary measure and that it would be reviewed on December 9, 2016 or even earlier.