March 02, 2007
All Scheduled State Co-operative Banks
Dear Sir,
Section 42(1) of Reserve Bank of India Act, 1934-Maintenance
of Cash Reserve Ratio (CRR)
Please refer to our Circular RBI/2005-2006/424
RPCD.RF.BC/93/07.02.01/ 2005-06 dated June 22, 2006 on the captioned subject.
Government of India in their Extraordinary Gazette notification No.S.O.21(E)
dated January 9, 2007 have notified January 9, 2007 as the date on which all
the provisions, except Section 3 of the Reserve Bank of India (Amendment) Act,
2006 shall come into force.
Section 3 of Reserve Bank of India (Amendment) Act, 2006 provided
for the removal of:
(1) the ceiling and floor on the CRR to be prescribed by the
RBI having regard to the need for securing monetary stability in the country:
and
(2) the provision for interest payment on eligible CRR balances
[i.e., the amount of reserves between the statutory minimum CRR and the CRR
prescribed by the RBI].
Since the above Section 3 is not notified so far, the minimum
CRR level of 3 per cent and the maximum CRR level of 20 per cent of total of
bank's demand and time liabilities shall remain in force from June 22, 2006
as per the extant provisions of Section 42 (1) of the Reserve Bank of India
Act, 1934.
Accordingly effective CRR maintained by Scheduled State Co-operative
Banks on total demand and time liabilities shall not be less than 3 per cent
subject to the exemptions as indicated in our circular RPCD.RF.BC.56/07.02.01/2006-07
March 02, 2007. Further in exercise of the powers conferred on Reserve Bank
of India under sub section (1) of section 42 of the Reserve Bank of India Act,
1934, it has been decided that every Scheduled State Co-operative Bank should
continue to maintain a Cash Reserve Ratio of 5.75 per cent effective from the
fortnight beginning from February 17, 2007 and 6.00 per cent effective from
the fortnight beginning from March 3, 2007 of its total demand and time liabilities.
2. In terms of the powers conferred on the Reserve Bank under
sub-Section 42(5)(c) of the Reserve Bank of India Act, 1934, it has been decided
to exempt such banks from payment of the penal interest who have breached the
statutory minimum CRR level of 3 per cent during June 22, 2006 to March 2, 2007
on account of CRR exemptions reckoned for computation of demand and time liabilities
for CRR.
3. It has also been decided that the Reserve Bank of India
will pay interest to all Scheduled State Co-operative Banks on the eligible
CRR balances at the rate of:
(a) 3.50 per cent per annum on eligible cash balances maintained
with the Reserve Bank of India under CRR requirement from the fortnight beginning
June 24, 2006 to December 8, 2006.
(b) 2.00 per cent on eligible cash balances maintained with
the Reserve Bank of India under CRR requirement from the fortnight beginning
from December 9, 2006 to February 16, 2007.
(c) 1.00 per cent on eligible cash balances maintained with
the Reserve Bank of India under CRR requirement from the fortnight beginning
from February 17, 2007.
4. A copy of the relevant notification RPCD.RF.BC53/07.02.01/
2006-07/ dated March 02, 2007 is enclosed.
5. Please acknowledge receipt to our Regional Office concerned.
Yours faithfully
(K.Bhattacharya)
General Manager