Mumbai: After several instances in which average fortnightly cash balances of banks kept with the Reserve Bank of India (RBI) unusually fell short of the mandated cash reserve requirement, the central bank has rectified the matter by resolving issues with how the data was reported.
“There were some issues with the way the data was being reported by banks and published in the RBI’s daily releases. The RBI was aware of the matter and has taken steps to resolve the erroneous presentation of the data,” a source aware of the developments said.
According to Section 42 (1) of the Reserve Bank of India Act, 1934, the RBI prescribes the Cash Reserve Ratio (CRR) for scheduled commercial banks. The CRR, which is one of the RBI’s strictest regulatory requirements for banks, is currently at 4.50% of net demand and time liabilities – a proxy for deposits.
This means banks must set aside that portion with the RBI as a prudential measure. The CRR can also be used to influence monetary policy by the RBI, as changes in the reserve requirement have a major impact on banking system liquidity.
An email sent to the RBI seeking comment on the matter did not receive a response by the time of publication. ET had reported on April 29, citing daily data published by the RBI, that average fortnightly cash balances of banks kept with the central bank had fallen short of the requirement several times over the past year.
Latest RBI data showed that in the fortnight ending May 31, banks’ average daily cash balances with the central bank were at ₹9.74 lakh crore, slightly higher than the requirement of ₹9.73 lakh crore.
Prior to this, from the fortnight ended May 19, 2023, to the fortnight ended April 19, 2024, there were 15 instances in which the average fortnightly cash maintained by banks had fallen short of the requirement, data showed.
Data going back to May 2021 show around 30 more instances of a shortfall. The quantum of shortfall ranges from very small figures – ₹44 crore in the fortnight ended May 19, 2023 – to larger sums such as ₹6,820 crore in the fortnight ended August 11, 2023.
While the RBI had in 2022 provided dispensation on CRR maintenance to at least one private sector bank, that leeway has been stopped for some time now and the central bank has not made any regulatory changes to the requirement for CRR.
All banks, including small finance banks and payments banks, have to maintain a minimum CRR of not less than 90% of the required CRR on all days during a reporting fortnight in a way that ensures that the average of CRR maintained daily is not less than the CRR prescribed by the RBI, according to the central bank’s norms.
