In a decisive monetary maneuver to control excess liquidity, the Reserve Bank of India (RBI) has raised the minimum daily Cash Reserve Ratio (CRR) maintenance requirement for scheduled commercial banks to 99 percent, up from the current threshold of 90 percent. The revised mandate comes into effect starting from the reporting fortnight beginning October 16, 2026. While the headline CRR percentage itself remains unchanged, the revised operational directive substantially restricts how banks handle their day-to-day cash balances with the central bank, ensuring that institutions park their mandated reserves on a near-continuous daily basis rather than relying on back-ended adjustments.

What Changes for Scheduled Commercial Banks

Under the existing regulatory framework, scheduled commercial banks were required to maintain an average CRR across a 14-day reporting fortnight, with flexibility allowing their daily reserve balance to dip as low as 90 percent on individual days, provided the fortnightly average balanced out. Under the updated notification, that leeway has been sharply reduced. Banks must now ensure that their cash balances with the RBI do not fall below 99 percent of the prescribed reserve requirement on any single day of the fortnight. This leaves virtually no room for banks to run deficits on high-demand days and make up the shortfall later in the reporting cycle.

The Liquidity Context Behind the Central Bank’s Intervention

The policy adjustment comes against the backdrop of substantial surplus liquidity in India’s banking system, which had surged to nearly ₹3.88 lakh crore earlier in the week. Robust government expenditure, steady foreign capital inflows, and post-monsoon festive liquidity have kept money-market conditions unusually loose, pulling overnight lending rates below the policy repo rate. By mandating that 99 percent of required cash reserves stay locked with the central bank every day, the RBI is effectively immobilizing a large portion of short-term float money, preventing systemic overhang from softening interbank lending rates and fueling inflationary pressures.

Market Implications and Near-Term Impact on Money Markets

For bank treasury desks, the tighter 99 percent floor significantly increases daily liquidity forecasting demands and cash-management precision. Lenders will no longer be able to deploy surplus cash flexibly into lucrative overnight money markets, call money desks, or short-term commercial papers on specific weekdays. Consequently, treasury heads expect overnight call money and collateralized borrowing rates (TREPS) to align more closely with the RBI’s policy corridor. While the change may marginally raise short-term funding costs for liquidity-deficit lenders, central bank officials believe the measure will stabilize volatility and ensure smoother monetary policy transmission across the financial sector.