100% extra CRR: ‘Mode of liquidity absorption must be non-disruptive’

The Reserve Bank’s move to implement incremental cash reserve ratio to absorb excess liquidity in the system is putting strain on the banks and there is a need to adopt non-disruptive mode of liquidity absorption, says a report.

In order to manage liquidity condition post demonetisation, the RBI on November 28 had asked banks to maintain an incremental CRR of 100 per cent on deposits accrued between September 16, 2016 and November 11, 2016.

“Due to incremental CRR, for the accretion of Rs 3.76 lakh crore in deposits, banks have to maintain Rs 4.69 lakh crore in regulatory ratios. Apart from this, banks will have to maintain 70 per cent LCR (liquidity coverage ratio) depending upon the category of the incremental liability,” SBI said in its internal report Ecowrap here on Monday.

The report estimate indicates that between Nov 10 to Dec 30, 2016, at 85 per cent withdrawal rate, the deposits that will be kept with banks will be Rs 1,94,200 crore.