DBOD.No.BC.86/12.01.001/98-99

August 20, 1998

Shravana 29, 1920 (Saka)

To All Scheduled Commercial Banks (excluding Regional Rural Banks)

Dear Sir,

Section 42(1) of the RBI Act, 1934 - Increase in Cash Reserve Ratio

Please refer to the Circular No. MPD/BC/180/07.01.279/98-99 dated August 20, 1998 from our Monetary Policy Department. On a review of the current foreign exchange and monetary conditions, it has been decided to effect an increase in Cash Reserve Ratio (CRR) as detailed below, as a temporary measure.

2. Increase in Cash Reserve Ratio (CRR)

Under Section 42(1) of the Reserve Bank of India Act, 1934 all Scheduled Commercial Banks [excluding Regional Rural Banks (RRBs)] are, at present, required to maintain with the Reserve Bank of India a Cash Reserve Ratio (CRR) of 10.0 per cent of the Net Demand and Time Liabilities (NDTL) (excluding liabilities subject to Zero CRR prescription). Effective from the fortnight beginning August 29, 1998, the CRR to be maintained by Scheduled Commercial Banks (excluding RRBs) is being increased by one percentage point from 10.0 percent to 11.0 percent of NDTL.

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

4. A copy of the relative notification DBOD No. BC 85/12.01.001/98-99 dated August 20, 1998 is enclosed.

5. We may reiterate that in view of the multiple prescriptions on different categories of liabilities including Zero prescription of CRR on certain 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 percent.

Yours faithfully

(N.K. Sarkar)

General Manager