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RBI hikes daily cash reserve ratio to 99% and launches ₹25,000‑crore bond issue
Reported by Harshdeep Singh (Fact-Checker) · Business Standard - Top Stories ·
Reported by one source so far
What Happened
The Reserve Bank of India raised the minimum daily cash reserve ratio (CRR) to 99 per cent, a level that will take effect from 16 October 2026. On 13 October, the RBI also announced a bond sale worth ₹25,000 crore aimed at pulling overnight market rates in line with the repo rate.
Reaction
Bankers warned that the 99‑per‑cent CRR will cut their flexibility in daily fund management. They said banks will have to keep a larger share of their prescribed reserves with the RBI each day, limiting the cash they can use for lending or other operations.
Context
The CRR is a tool the central bank uses to control money supply; a higher ratio means banks hold more money with the RBI, which can tighten liquidity. Selling large‑scale bonds is a common way to absorb excess cash and steer short‑term rates toward the policy repo rate.
ExplainerWhy this matters
What Happened
The RBI lifted the daily cash reserve ratio to 99 per cent effective 16 October and, two days earlier, unveiled a ₹25,000‑crore bond issue to mop up excess liquidity.
Why It Matters
A higher CRR forces banks to keep more of their deposits with the central bank, shrinking the pool of money they can lend or invest. This tightens overall liquidity in the economy, helping the RBI keep inflation in check. The simultaneous bond sale pulls cash out of the market, supporting the RBI’s goal of keeping overnight rates close to the policy repo rate, which is the benchmark cost of borrowing for banks.
What Happens Next
Banks will adjust their daily cash positioning to meet the new 99 per cent requirement, likely curbing short‑term lending until they rebalance their balance sheets. Market participants will watch the bond auction results for signals on how much liquidity is being withdrawn and whether overnight rates stay aligned with the repo rate.
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