CASH RESERVE RATIO

1. Scheduled Commercial Banks are required to maintain GRR as per section 42(1) of RBI Act.

2. Banks are required to maintain certain percentage of Net Demand & Time Liabilities as cash with RBI.

3. With effect from 1st April 2007, the RBI can prescribe the Cash Reserve Ratio (CRR) for Scheduled Commercial Banks without any floor rate or ceiling rate. Accordingly, there is no minimum or maximum CRR as per RBI Act and RBI will fix CRR.

4. Banks are required to maintain the prescribed CRR based on their NDTL as on the last Friday of the second preceding fortnight.

5. CRR balance is kept as cash with RBI.

6. The actual balance on any day of the fortnight (14 days) may be more or less than the required balance. However, cash balance with RBI on any day of the fortnight, should not fall below 90 per cent of the required average daily cash balance.

7. RBI will not pay any interest on the CRR balances with effect from 31^st March 2007.

8. In cases of default in maintenance of CRR requirement on a daily basis, which is presently 90% of the total Cash Reserve Ratio requirement, penal interest will be recovered for that day at the rate of three per cent per annum above the bank rate on the amount of shortfall and if the shortfall continues on the next succeeding day/s, penal interest will be recovered at a rate of five per cent per annum above the bank rate.

9. In cases of default in maintenance of CRR on average basis during a fortnight, penal interest will be impose.

10. Reserve Bank of India has prescribed statutory return i.e. Form A return (for CRR) to be sent fortnightly.