RBI introduces incremental CRR to manage excess liquidity

RBI introduces incremental CRR to manage excess liquidity , The Reserve Bank of India increasing the Cash Reserve Requirement (CRR) for incremental deposits between September 16 and November 11 to 100% while the current CRR is 4%, effective from November 25, 2016. The RBI move will require all excess deposits that banks in India are getting — estimated to be about Rs 3.25 lakh crore by Friday —

iii. Because of the demonetisation move, excess deposits amount collected in banks was nearly  Rs 3.25 lakh crore

iv. This deposit amount is kept with the central bank, only the depositors can get 4% interest.

Cash Reserve Requirement (CRR) :

♦ Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank.