June 22, 2006
To All Scheduled Commercial Banks
(excluding Regional Rural Banks)
Dear Sir,
Maintenance of CRR on Exempted Categories
Please refer to paragraph 2.3.7 of our Master
Circular RBI/2005-06/70/DBOD.Ret.BC.18/12.01.001 dated July 19, 2005 on
CRR and SLR.
2. In terms of the instructions contained therein,
every Scheduled Commercial Bank is exempted from maintaining average CRR on
the following liabilities, subject to the maintenance of statutory minimum CRR
of 3 per cent on its total demand and time liabilities as computed under section
42(1) of the Reserve Bank of India Act, 1934:
(i) Liabilities to the banking system in
India as computed under Clause (d) of the Explanation to Section 42(1) of the
RBI Act, 1934;
(ii) Credit balances in ACU (US $) Accounts;
(iii) Transactions in Collateralized Borrowing
and Lending Obligation (CBLO) with Clearing Corporation of India Ltd. (CCIL);
and
(iv) Demand and Time Liabilities in respect
of their Offshore Banking Units (OBUs).
3. A reference is invited to our circular DBOD.No.Ret.BC.91/12.01.001/2005-2006
dated June 22, 2006 regarding enactment of the Reserve Bank of India (Amendment)
Bill 2006 and its coming into force with effect from June 22, 2006. Consequent
upon the amendment to sub-section (1) of Section 42 of the Reserve Bank of India
Act, 1934, the statutory minimum CRR requirement of 3 percent of total demand
and time liabilities no longer exists.
4. Further, consequent upon the amendment to
sub-section (1) of Section 42 of the Reserve Bank of India Act, 1934, the Reserve
Bank having regard to the needs of securing monetary stability in the country,
can prescribe the Cash Reserve Ratio (CRR) for scheduled banks without any floor
rate or ceiling rate. Accordingly, Reserve Bank of India has decided to continue
with the status quo on the rate of CRR required to be maintained by Scheduled
Commercial Banks at 5 per cent of their demand and time liabilities, in terms
of our circular DBOD.No.Ret.BC.91/12.01.001/2005-2006 dated June 22, 2006. It
has also been decided to exempt the liabilities referred to at paragraph 2 (i),
(ii), (iii) and (iv) on the previous page from the above CRR requirement of
5 per cent of the demand and time liabilities of Scheduled Commercial Banks.
5. A copy of the relative notification DBOD.No.Ret.BC.92/12.01.001/2005-2006
dated June 22, 2006 is enclosed.
Yours faithfully,
(T.B.Satyanarayan)
DBOD.No.BC. 92 /12.01.001/2005-2006
June 22, 2006
NOTIFICATION
Consequent upon the amendment to sub-section
(1) of Section 42 of the Reserve Bank of India Act, 1934 (2 of 1934), the statutory
minimum Cash Reserve Ratio (CRR) requirement of 3 per cent of the total demand
and time liabilities in respect of Scheduled Commercial Banks no longer exists
with effect from June 22, 2006. Further, consequent upon the amendment to sub-section
(1) of Section 42 of the Reserve Bank of India Act, 1934, the Reserve Bank having
regard to the needs of securing monetary stability in the country, can prescribe
the Cash Reserve Ratio (CRR) for scheduled banks without any floor rate or ceiling
rate. In terms of these powers, Reserve Bank of India has decided to continue
with the status quo on the rate of CRR required to be maintained by Scheduled
Commercial Banks at 5 per cent of their demand and time liabilities. In exercise
of the powers conferred by sub-section (7) of Section 42 of the Reserve Bank
of India Act, 1934, the Reserve Bank of India hereby exempts every Scheduled
Commercial Bank from the maintenance of CRR at 5 per cent on the following liabilities
with effect from June 22, 2006: