DBOD.No.BC.22/12.01.001/97-98

March 23, 1998

Chaitra 2, 1920 (Saka)

All Scheduled Commercial Banks
(excluding Regional Rural Banks)

Dear Sir,

Section 42(1) of the Reserve Bank of India Act, 1934 - reduction in Cash Reserve Ratio (CRR)

Please refer to Governor's Circular No. MPD/BC/173/07.01.279/97-98 dated March 23, 1998 on the above subject. At present, under Section 42(1) of the Reserve Bank of India Act, 1934 all the Scheduled Commercial Banks (excluding Regional Rural Banks) are required to maintain with Reserve Bank of India a Cash Reserve Ratio (CRR) of 10.50 per cent of their net demand and time liabilities (excluding liabilities subject to zero CRR prescriptions). It has now been decided to reduce the CRR to be maintained by Scheduled Commercial Banks (excluding Regional Rural Banks) by one half of one percentage point from 10.50 percent to 10.00 per cent in two phases of 0.25 percentage point each as set out below:

Effective Date (i.e. fortnight beginning from)	CRR on net demand and time liabilities (per cent)
March 28 ,1998	10.25
April 11, 1998	10.00

2. It may be mentioned that all other prescriptions regarding maintenance of incremental Cash Reserve Ratio under Section 42 (1A) of Reserve Bank of India Act, 1934, would continue.

3. A copy of the relative notification DBOD. No. BC. 21/12.01.001/97-98 dated March 23, 1998 is enclosed.

4. It may be reiterated that in view of the multiple prescriptions on different categories of liabilities including a prescription of a zero CRR on some liabilities, as stipulated under the law, effective CRR maintained by Scheduled Commercial Banks on total net demand and time liabilities should not be less than 3 per cent.

Yours faithfully

(D.V. Jhaveri)

General Manager