RBI makes banks hold 99% of required CRR every day to drain surplus cash

The Reserve Bank of India has told banks they must hold at least 99% of their required cash reserve ratio (CRR) balance on every day of a reporting fortnight. The current floor is 90%. The change applies from the fortnight beginning 16 October 2026.

The RBI notified the change on 9 October, two days after the Monetary Policy Committee raised the repo rate by 25 basis points to 5.50%. On the same day it announced a ₹25,000 crore sale of government bonds through open market operations (OMO) on 13 October. Both steps aim to pull surplus cash out of the banking system.

What changes for banks

Every bank has to keep a set share of its deposits as cash with the RBI. This is the CRR, now 3%, and banks earn no interest on it.

The 3% is measured as an average over a fortnight. Until now a bank could let its balance fall to 90% of the requirement on some days, as long as the average held. From 16 October that daily floor rises to 99%. The fortnightly average must still be at least 3%.

In practice, banks will have less room to run their CRR balance down on any single day and use that money elsewhere.

Why the RBI is doing this

Banks have far more cash than they need. Surplus funds parked with the RBI under its liquidity adjustment facility stood at ₹3.88 lakh crore on 8 October.

That surplus has kept short-term rates below the repo rate. The weighted average call rate, the rate at which banks lend to each other overnight, was 5.31% on 9 October, below the 5.50% repo rate. It has averaged about 14 basis points below the policy rate since the August review. In his 7 October policy statement, Governor Sanjay Malhotra said the RBI would use a mix of liquidity tools to bring the call rate in line with the repo rate.

Other steps to absorb cash

The RBI has been draining funds for weeks. It sold ₹1 lakh crore of government bonds through OMOs in September, in three tranches on 17, 21 and 28 September. The sale on 13 October covers six securities maturing between 2030 and 2034.

It has also run variable rate reverse repo (VRRR) auctions, where banks park money with the central bank for a fixed period. A three-day auction drew nearly ₹1.4 lakh crore against ₹1.5 lakh crore on offer. A 10-day auction drew ₹18,170 crore. A ₹2 lakh crore three-day auction is set for 12 October.

This has been done before

The RBI last set the daily floor at 99% in July 2013, when it was trying to calm the foreign exchange market after the US Federal Reserve signalled it would scale back bond buying.

Daily minimum CRR maintenance

1. Jul 2013Raised to 99% of the requirement during foreign exchange volatility
2. Sep 2013Cut to 95%
3. Apr 2016Cut to 90%
4. 9 Oct 2026RBI notifies an increase back to 99%
5. 16 Oct 2026New 99% floor applies from this fortnight

What it means for borrowers

Loan rates were already moving before this step. After the repo increase, several state-owned banks raised their repo-linked lending rates by 25 basis points. Bank of Baroda’s rate went from 7.90% to 8.15%. Punjab National Bank, Bank of India and Indian Overseas Bank moved from 8.10% to 8.35%, and Indian Bank from 7.95% to 8.20%.

Existing loans linked to an external benchmark are usually reset within three months.

What comes next

The OMO sale is on 13 October. The new CRR floor applies from 16 October. The minutes of the October policy meeting are due on 21 October, and the next MPC meeting is from 2 to 4 December 2026.