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Incremental CRR (iCRR): How RBI May Drain Liquidity

27 August 20261 min read
ECONOMYIncremental CRR(iCRR): How RBIMay DrainLiquidity27 August 2026safalsetu.com

Why in the news

The RBI might tighten liquidity with an incremental cash reserve ratio, ahead of any repo rate increase.

Key facts

  • CRR: a percentage of Net Demand and Time Liabilities (NDTL) kept with the RBI at no interest.
  • iCRR targets only the increase in deposits.
  • Compared with a full hike, it spares each bank’s existing deposit base.

Worked example

  • Deposits go from ₹1,000 crore to ₹1,200 crore: incremental deposits are ₹200 crore.
  • At 10% iCRR the bank parks ₹20 crore extra with the RBI.
PointNormal CRRIncremental CRR
Applies toOverall NDTLAdditional deposits in a set period
ImpactWhole deposit baseRecent deposit growth only

Why the RBI uses it

  • Absorb excess liquidity from banks.
  • Reduce money available for lending.
  • Check inflationary pressure; a temporary measure.

Exam angle

  • Expansion: iCRR is incremental cash reserve ratio.
  • Base for CRR: NDTL.

Test yourself

1. An incremental CRR applies to which part of a bank's deposits?

iCRR applies only to incremental deposits.

2. A bank's deposits rise by ₹200 crore and a 10% iCRR is imposed. How much must be kept with the RBI?

10% of ₹200 crore is ₹20 crore.

3. CRR is calculated as a share of which base of a bank?

CRR is a share of NDTL.

This topic is part of Daily Current Affairs 27 August 2026 (29 topics).

All topics of the dayDay quizAugust 2026

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