The Reserve Bank of India has amended its 2025 Cash Reserve Ratio and Statutory Liquidity Ratio framework for Local Area Banks with immediate effect, incorporating provisions applicable to scheduled banks after a Local Area Bank was added to the Second Schedule of the Reserve Bank of India Act, 1934. The change further updates the framework following earlier revisions to eligible institution references and regulatory reporting requirements. Scheduled Local Area Banks must maintain an average Cash Reserve Ratio (CRR) of 3% of net demand and time liabilities under the staged rates that took effect in 2025, with at least 90% of the required CRR held each day during a reporting fortnight. The amendment also enables the RBI to impose an incremental CRR, specifies exemptions for certain interbank liabilities, Asian Clearing Union US dollar account balances and market repo funding against government securities, and exempts the latter from the Statutory Liquidity Ratio requirement. It establishes penalties for daily and fortnightly CRR shortfalls, beginning at 3 percentage points above the Bank Rate for an initial daily shortfall and rising to 5 percentage points above the Bank Rate if the shortfall continues.
2026-09-11Reserve Bank of India
Reserve Bank of India adds scheduled Local Area Bank reserve requirements following a bank’s inclusion in the Second Schedule
The Reserve Bank of India has added scheduled bank provisions to its reserve requirement framework for Local Area Banks after one such bank was included in the Second Schedule. Scheduled Local Area Banks are subject to a 3% average CRR, a 90% daily minimum, specified exemptions and escalating penalties for shortfalls.