Daily cash reserve rule tightened as RBI lifts CRR floor to 99%

The Monetary Authority of India has imposed stricter daily compliance standards for the cash reserve ratio. Beginning the reporting period of October 16, banks are obligated to keep a daily cash reserve of at least 99 percent of the statutory CRR, compared with the earlier lax threshold of 90 percent. Under the old regime, banks could temporarily fall below the daily requirement provided their average over a two‑week window satisfied the rule. The revised guidance eliminates this leeway, demanding near‑full reserve levels each day. While the overall CRR percentage remains unchanged, the policy is intended to enforce more disciplined cash management and ensure continuous adherence to reserve mandates. The effect will be uneven: banks that regularly operate close to the minimum reserve may need to modify treasury practices, whereas those with generous liquidity buffers will likely see limited operational impact. The decision follows Governor Sanjay Malhotra's comments in the October 7 monetary policy review, which projected a gradual decline in surplus cash due to natural outflows. Earlier in the year, the banking system experienced a cash surge from strong capital inflows and the RBI's FCNR‑B deposit scheme. Recent reverse‑repo auctions, bond sales, and other cash‑draining measures have reduced this excess liquidity. According to RBI figures, the average daily additional cash under the LAF was about ₹5.9 lakh crore after the August meeting, and the latest readings place excess liquidity at approximately ₹3.92 lakh crore. The central bank pledged continued monitoring and the use of appropriate instruments—including VRR auctions, dollar‑rupee swaps and open market operations—to maintain orderly liquidity conditions.