Banks said to have asked RBI to lower daily cash reserve rule

This was the second meeting between bankers and the RBI as the authority looks at revamping its liquidity management in the age of digital banking.

Indian lenders have asked the monetary authority for more leeway on the amount of cash they need to maintain daily as part of reserve requirements, according to people familiar with the matter.

The cash reserve ratio currently stands at 4% of deposits, which needs to be reported by banks to the Reserve Bank of India on a fortnightly basis. Banks set aside 90% of this requirement daily at present.

Some bankers, who met with senior officials of the central bank on Wednesday, have suggested lowering this to 80%-85%, the people said.

This was the second meeting between bankers and the RBI as the authority looks at revamping its liquidity management in the age of digital banking. A recent RBI panel report said that with 24x7 payment systems, banks must be prepared with enough liquidity to handle sudden withdrawals, especially after overnight money markets close.

An email sent to the RBI spokesperson wasn’t answered till the time of filing this report.

Banks also asked the RBI to keep using its daily variable rate cash injection, the people said. While the central bank usually uses the 14-day repo as its main tool for cash injection, it has recently been skipping it. Lenders have also suggested fixed-rate loans tied to a share of their deposits to better manage liquidity, the people said.

The opinion on keeping the weighted average call rate as the operating rate of monetary policy was more divided, with some arguing to keeping the call rate as it is an interbank rate which others supported moving to a secured rate, the people said.