Liquidity in domestic banks increased after RBI’s decision to demonetise Rs 2000 note on 19th May and to control this RBI introduced ICRR. It will be removed in a phased manner from tomorrow Saturday. Know what decision RBI took today, what will be the benefit to the banks.
After the decision of the Reserve Bank of India (RBI) to stop the circulation of Rs 2000 notes on May 19, the cash in the banks of the country had increased, to control which the RBI had implemented Incremental Cash Reserve Ratio (ICRR) which is now It will be closed in a phased manner from tomorrow i.e. Saturday.
RBI imposes I-CRR so that cash can be reduced.
What decision did RBI take today?
In today’s announcement, the central bank confirmed the phasing out of the ICRR. As per the decision, the ICRR will be completely phased out by October 7.
Before this, the ICRR will be reduced by 25 percent on Saturday, September 9. After this, 25 percent of the ICRR will be removed on 23 September. The remaining 50 percent will be removed on October 7.
What is ICRR?
Before Incremental Cash Reserve Ratio (ICRR), you should know about CRR i.e. Cash Reserve Ratio. CRR is part of the monetary policy tool of the RBI. Its goal is to control the supply of cash in the system and inflation.
Whenever the stock of cash in the bank increases rapidly. To deal with this situation, the Reserve Bank introduces additional ICRR along with CRR. ICRR is the cash reserve limit over CRR.
Which is determined keeping in view the increase in the size of the deposit. Because of this, banks have to keep more cash in the Reserve Bank than before.
What effect will this have on the bank?
As we just told you that due to ICRR, banks have to deposit more cash with RBI, due to which less money is left with the banks to give loans.
In such a situation, if the ICRR ends, then the banks will get their money, due to which the banks will be able to give more loans. Overall, this decision will provide relief to banks.
So many notes have been returned to the bank so far
93 percent of the Rs 2000 notes that were in circulation on May 19 have been returned to the banks, whose value till August 2023 is Rs 3.32 lakh crore.
