RBI’s 99% daily CRR rule: what changes for banks on 16 October
The reserve target stays the same. Banks will have much less room to let their daily cash balance fall below it.
On 9 October 2026, the Reserve Bank of India raised the minimum amount of required cash reserves that scheduled banks must hold each day, from 90% to 99%. The change takes effect for the maintenance period beginning 16 October. It brings banks’ daily balances much closer to their full reserve requirement while leaving the required average unchanged. RBI’s circular.
The cash reserve ratio, or CRR, determines how much a bank must keep with the RBI on average. The daily floor is a percentage of that required reserve, rather than of the bank’s deposits. It determines how far the balance can fall below the reserve target on an individual day.
First, work out the required reserve
Banks take deposits, make loans and carry out payments. Alongside those activities, scheduled commercial banks must hold a prescribed cash balance with the RBI. These CRR balances earn no interest, according to the RBI’s directions.
The current CRR is 3% of net demand and time liabilities, usually shortened to NDTL. Deposits are a large part of this base, but the precise calculation also covers other liabilities and makes adjustments for transactions with the banking system. Demand liabilities are payable on demand, while time liabilities become payable after a specified period. Simply taking a bank’s total deposits would not necessarily reproduce its regulatory calculation. RBI’s current reserve-ratio directions, paragraphs 9, 11 and 22.
Once the bank has calculated the relevant NDTL base, multiplying it by 3% gives the reserve amount it must maintain on average. The base comes from the end of the second preceding reporting period. This lag gives the bank a known reference figure for planning its cash, rather than requiring it to recalculate its reserve target from every new deposit during the maintenance period.
That target is measured over a reporting “fortnight”. Under the current rules, the first period runs from the 1st to the 15th of a calendar month; the second runs from the 16th to the month’s last day. October’s new rule therefore begins with the 16–31 October period. The daily balances, measured at the close of business, must average at least the required reserve over that period.
The daily floor moves closer to the average
Suppose a bank’s required average CRR balance is ₹100 crore. Until 15 October, it can hold as little as ₹90 crore on an individual day, provided its balances over the whole maintenance period average at least ₹100 crore. A below-target day has to be offset by higher balances on other days.
From 16 October, the daily minimum becomes ₹99 crore. The ₹100 crore average requirement stays in place. The permitted gap below that target shrinks from ₹10 crore to ₹1 crore.
| Rule for this illustrative bank | Until 15 October | From 16 October |
|---|---|---|
| Required average balance | ₹100 crore | ₹100 crore |
| Minimum balance on any day | ₹90 crore | ₹99 crore |
| Maximum daily gap below the target | ₹10 crore | ₹1 crore |
Illustrative arithmetic using a ₹100 crore required reserve. These are teaching amounts, not a bank’s reported balances.
Holding ₹99 crore every day would still fall short of the ₹100 crore average. The bank must meet both conditions: stay at or above the daily floor and reach the full average over the period. Conversely, holding extra reserves on one day does not allow it to fall below the floor on another.
The ₹9 crore increase in this bank’s daily minimum shows how much flexibility it loses on a low-balance day. The required average reserve remains ₹100 crore.
Why banks value room to move balances between days
A bank’s money flows change from day to day. Customers send payments to accounts at other banks, businesses receive money, and deposits arrive or leave. A bank can therefore finish one day with less cash at the RBI and another with more, even while meeting the same average reserve requirement.
The old daily floor allowed a larger temporary dip. Under the new floor, a bank whose closing balance would have fallen to ₹95 crore in our example must arrange enough cash to reach at least ₹99 crore that day. It might retain more money in its RBI account or obtain short-term funds, depending on its position. An expected inflow later in the period cannot by itself cure a breach of today’s minimum.
The adjustment will differ across banks. A bank that already keeps at least ₹99 crore against this target on every day has less to change than one that regularly relies on balances between ₹90 crore and ₹99 crore. Actual daily balances and funding choices determine the practical effect.
What the RBI says about the reason
The RBI says it made the decision after reviewing current liquidity conditions. In this context, liquidity concerns the cash banks have available to meet payments and manage their short-term funding. Raising the daily floor narrows their ability to use part of the required reserve temporarily and replace it later in the period.
The circular sets out the new rule and its start date, but gives no estimate of the banking system’s resulting cash adjustment.
The bank’s treasury staff must manage these daily balances. The notification does not set a new home-loan rate, deposit rate or EMI; any effect on customer pricing would depend on how funding conditions change and how banks respond.