The Reserve Bank of India (RBI) has tightened liquidity management by raising the minimum daily maintenance requirement for the cash reserve ratio (CRR) from 90 per cent to 99 per cent of the prescribed requirement, effective from the fortnight beginning October 16, 2026. The move follows the central bank’s decision to raise the policy repo rate by 25 basis points to 5.50 per cent earlier this week, the first increase in two and a half years.
It has also announced an open market operation (OMO) sale of government securities worth ₹25,000 crore on October 13 to absorb surplus liquidity from the banking system.
The last time the RBI raised the minimum daily CRR maintenance requirement to 99 per cent was in July 2013, amid heightened volatility in the foreign exchange market following the US Federal Reserve’s so-called “taper tantrum”. CRR is the proportion of banks’ deposits that they must maintain as cash balances with the RBI; banks do not earn interest on these balances.
Under the revised requirement, banks must maintain at least 99 per cent of their prescribed CRR on each day of the reporting fortnight, while ensuring that their average daily CRR balance over the fortnight is no less than the prescribed requirement of 3 per cent.
The move will reduce banks’ flexibility in managing daily liquidity needs and could tighten money market conditions. Additionally, the RBI announced an OMO of bond sales worth ₹25,000 crore to absorb excess liquidity on October 13. The liquidity surplus — measured by the amount banks parked in the RBI’s liquidity adjustment facility window — stood at ₹3.88 trillion as on October 8. The measures are aimed at bringing the weighted average call rate (WACR), the operating target of monetary policy, closer to the policy repo rate of 5.50 per cent.
On Friday, the WACR stood at 5.31 per cent, compared with 5.30 per cent on Thursday, keeping it closer to the lower end of the interest rate corridor.
The standing deposit facility (SDF) rate of 5.25 per cent sets the floor, while the marginal standing facility (MSF) rate of 5.75 per cent sets the ceiling.
Since the August monetary policy review, the WACR has traded, on average, 14 basis points below the policy repo rate.
In his monetary policy statement on Wednesday, RBI Governor Sanjay Malhotra had said the central bank would use an appropriate mix of liquidity management tools to align the WACR with the policy repo rate.
After raising the minimum daily CRR maintenance requirement to 99 per cent in July 2013, the RBI lowered the requirement to 95 per cent in September 2013, and further reduced it to 90 per cent in April 2016.
Bankers said the increase in the daily CRR maintenance requirement would reduce their flexibility in managing funds, as they would have to maintain a higher proportion of the prescribed reserves with the RBI each day.
Bond sales to absorb surplus liquidity The RBI said its decision to sell government securities through OMOs followed a review of current and evolving liquidity conditions.
The ₹25,000 crore auction will be conducted using the multiple-price method, with six government securities maturing between 2030 and 2034 on offer. The RBI has not specified a separate notified amount for individual securities.
The central bank will decide the amount of each security to be sold and reserves the right to accept bids for less than the notified aggregate amount or reject bids, either wholly or partially.
The RBI sold government securities worth ₹1 trillion through OMOs in September in three tranches: ₹50,000 crore on September 17 and ₹25,000 crore each on September 21 and September 28, to absorb surplus rupee liquidity.
Meanwhile, banks parked ₹18,170 crore in the RBI’s 10-day variable rate reverse repo (VRRR) auction. Market participants attributed the weak demand for longer-tenure auctions to the lack of additional returns for locking in funds for longer periods.
The response to the three-day VRRR auction was stronger, with banks parking nearly ₹1.4 trillion against a notified amount of ₹1.5 trillion.
“With the maximum rate at 5.49 per cent across tenures of one to 29 days, banks may be reluctant to commit funds for longer periods without a term premium,” said a senior banker with a private bank.
The RBI plans to conduct a three-day VRRR auction worth ₹2 trillion on Monday.
