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Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →The Reserve Bank of India did not require banks to hold 100% of all deposits as cash reserves. On 26 November 2016, it temporarily set a 100% cash reserve ratio (CRR) on a defined increase in banks’ net demand and time liabilities (NDTL), while the ordinary CRR remained 4% of outstanding NDTL. The RBI said the measure would absorb part of the surplus liquidity that had built up after deposits rose relative to bank credit during demonetisation.
What the RBI’s 100% CRR measure applied to
The policy had two distinct rates. The ordinary CRR on banks’ outstanding NDTL stayed at 4%. The temporary 100% rate applied only to the increase in NDTL between 16 September and 11 November 2016. It covered scheduled banks and took effect from the fortnight beginning 26 November 2016, when the RBI announced it.
| Requirement | Rate and base | Timing |
|---|---|---|
| Ordinary CRR | 4% of outstanding NDTL | Unchanged by the announcement |
| Temporary incremental CRR | 100% of the increase in NDTL from 16 September to 11 November 2016 | For scheduled banks, effective from the fortnight beginning 26 November 2016 |
NDTL is the banking-system measure of net demand and time liabilities on which reserve requirements are calculated. The crucial word is incremental: the 100% rate applied to the specified increase, not to a bank’s full deposit base. The RBI’s 26 November 2016 announcement sets out the rates, measurement dates and effective date.
Why the RBI introduced it after demonetisation
Specified bank notes of ₹500 and ₹1,000 began losing legal-tender status on 9 November 2016. As these notes returned to the banking system, deposits surged relative to the expansion in bank credit. The RBI said the result was large excess liquidity and that it expected the surplus to grow in the following fortnights.
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The RBI described the incremental CRR as “a purely temporary measure.” Its stated purpose was to absorb part of the surplus liquidity arising from the return of specified bank notes while leaving banks with adequate liquidity to meet productive sectors’ credit needs. The RBI said it would review the measure on 9 December or earlier.
How CRR fits into the RBI’s liquidity toolkit
CRR requires banks to maintain a specified proportion of NDTL with the RBI. It is one of several instruments used to manage liquidity, rather than the only mechanism for responding to changing conditions. The RBI’s overview of monetary policy and liquidity management also describes liquidity-adjustment operations, open-market operations and the Market Stabilisation Scheme (MSS).
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- Liquidity-adjustment operations: RBI lending or absorption operations that manage liquidity.
- Open-market operations: transactions in government securities that affect liquidity.
- Market Stabilisation Scheme: government securities are issued and the proceeds sequestered. The RBI says MSS was used after demonetisation to address surplus liquidity associated with increased public deposits.
The temporary incremental CRR was different in scope: it applied to a defined increase in banks’ liabilities over a specified period. It was one part of the broader liquidity response, not a change of the ordinary CRR to 100%.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What the announcement does—and does not—show
The RBI’s announcement establishes the measure’s scope, timing and stated rationale. It does not establish a measured causal effect of this specific temporary CRR action on bank lending, inflation or economic output. The announced rates are policy parameters, not estimates of those outcomes.
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A contemporaneous Scroll report also described the requirement as applying to incremental deposits made during the specified period, rather than all deposits.
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