Business · Economy · 1 day ago
RBI tightens bank reserve rules and plans bond sales to drain cash
India’s central bank, the Reserve Bank of India, is taking steps to reduce extra cash in the banking system.
It will sell government bonds worth 250 billion rupees on October 13.
From October 16, banks must keep at least 99% of their required cash reserves with the RBI each day, up from 90%.
Banks already have to hold reserves equal to 3% of their deposits, and they earn no interest on that money.
The tighter daily rule leaves banks with less flexibility to use their funds, although banks have generally held more than 95% of the required amount.
The measures follow a recent increase in the RBI’s main policy rate, its first in more than two years, and are intended to bring short-term market rates closer to that rate.
The RBI says it will use a mix of tools to manage liquidity.
The Reserve Bank of India raised banks’ minimum daily cash reserve requirement from 90% to 99%, effective from October 16, 2026.
The RBI also announced bond sales worth ₹25,000 crore to absorb excess liquidity.
The measures are intended to drain liquidity and bring the overnight call rate closer to the policy repo rate.
The change reduces banks’ flexibility to manage their daily liquidity needs.
The 99% daily requirement was last imposed in July 2013, according to Business Standard.
- Who
- The Reserve Bank of India and banks operating under its cash reserve rules.
- What
- The RBI raised the minimum daily CRR maintenance requirement to 99% from 90% and announced bond sales to absorb liquidity.
- When
- The new CRR requirement takes effect from October 16, 2026. The bond auction is scheduled for October 13, according to Business Standard.
- Where
- India.
- Why
- To drain excess liquidity and align the weighted average call rate with the policy repo rate.
This story does not have two clearly opposing sides.
The move will leave banks with less funds available for other uses. However, the overall impact may be limited as banks have generally been maintaining CRR balances of more than 95 per cent of the prescribed requirement.
India’s banking system liquidity surplus averaged more than 7 trillion rupees daily, according to Economic Times.
The RBI raised its policy repo rate, the first increase in two and a half years according to Business Standard.
The RBI scheduled an auction of bonds worth ₹25,000 crore to absorb excess liquidity, according to Business Standard.
The increase in minimum daily CRR maintenance to 99% takes effect.
- Daily CRR maintenance
- 99%, up from 90%
- Effective date
- October 16, 2026
- Bond sales
- ₹25,000 crore
- Policy repo rate
- 5.5%
- Last comparable CRR requirement
- 99% in July 2013
Sources
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