The Reserve Bank of India (RBI) has decided to change the rules for the Cash Reserve Ratio (CRR). CRR is the portion of total deposits that banks must keep with the RBI. Currently, banks do not earn any interest on this money. The central bank is increasing the minimum daily maintenance of CRR from 90 per cent to 99 per cent. This new rule will start from the fortnight beginning October 16, 2026.

Under the old rules, banks had a lot of flexibility. They could keep less cash on some days and more on others, as long as they met the average requirement over two weeks. Now, that flexibility is almost gone. Banks must ensure that every single day, they have at least 99 per cent of the required amount parked with the RBI. This move is meant to suck out excess liquidity (extra cash) from the banking system.

The main reason for this change is a massive surge in liquidity. Banks collected a huge amount of FCNR(B) deposits (Foreign Currency Non-Resident accounts) totaling $133 billion between June and August. This happened through a special window opened by the RBI. Because of this, the banking system has too much cash. The average daily surplus has been around ₹5.9 lakh crore recently.

The RBI has already tried other ways to remove this extra money. They used tools like Variable Rate Reverse Repo (VRRR) auctions and Open Market Operation (OMO) sales. VRRR is when the RBI auctions interest rates to take money from banks for short periods. OMO sales involve the RBI selling government bonds to take cash out of the system. However, these steps were not enough to manage the surplus.

For bank officers, this means treasury management will become much stricter. There is less room to play with daily cash flows to earn extra profit. Experts believe this move also stops banks from using CRR funds to bet against the Indian Rupee in the currency market. By keeping 99 per cent of the cash locked up daily, banks have less free money for speculative trading.

For customers, this change might not have an immediate direct impact on savings rates. However, it ensures that the banking system stays stable and inflation is kept under control by managing the money supply. It also helps the RBI keep the overnight lending rates close to the Repo Rate, which is the main interest rate in the economy.

Looking ahead, the RBI is likely to continue using OMO sales and foreign exchange interventions to manage liquidity. Bank treasury teams will need to be very careful with their daily calculations starting mid-October. Any mistake in maintaining the 99 per cent daily limit could lead to penalties or operational issues. This signal shows the RBI is very serious about keeping tight control over the money circulating in India.