RBI review on I-CRR: The Reserve Bank of India (RBI) on Friday (September 8) decided to discontinue the incremental cash reserve ratio (I-CRR) in a phased manner. The central bank had announced the measure in its August 10 monetary policy meeting wherein scheduled banks were required to maintain an I-CRR of 10 per cent on the increase in their net demand and time liabilities (NDTL) between May 19, 2023, and July 28, 2023. The measure was intended to absorb the surplus liquidity generated by various factors, including the return of Rs 2000 notes to the banking system. 

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"It was indicated that the I-CRR is a temporary measure for managing the liquidity overhang and that the I-CRR will be reviewed on September 8, 2023, or earlier with a view to returning the impounded funds to the banking system ahead of the festival season," it had said. 

Based on an assessment of current and evolving liquidity conditions, the RBI said that it has been decided that the amounts impounded under the I-CRR will be released in stages so that system liquidity is not subjected to sudden shocks and money markets function in an orderly manner. The release of funds would be as follows:

Source: RBI press release

As much as 93 per cent of Rs 2000 currency notes that were in circulation on May 19 -- the day when the currency was withdrawn from circulation -- have been returned to banks.

The total value of Rs 2000 banknotes received back from circulation is Rs 3.32 lakh crore up to August 31, 2023.

Post-development, banking stocks rallied. Last seen, the S&P BSE Bankex was trading 294 points, or 0.58 per cent higher at 50,581.37 levels. Federal Bank, AU Small Finance Bank, and SBI were all trading higher.

(With PTI inputs)