Subha Sri Narayanan, Director, CRISIL Ratings Ltd

“As much as ~Rs 2.7 lakh crore worth of Rs 2,000 notes have gushed to banks as deposits in the two months since the RBI announced withdrawal on May 19.

Consequently, total bank deposits in the period surged to Rs 7.9 lakh crore, compared with ~Rs 4.2 lakh crore in the two months preceding the Rs 2,000 note withdrawal.

Therefore, RBI, in a bid to adhere to its stance of withdrawal of accommodation in the monetary policy, has imposed a 10% incremental cash reserve ratio (I-CRR) on the net demand and time liabilities (NDTL) of banks gained between May 19, 2023, and July 28, 2023.

About Rs 1 lakh crore of liquidity will be drained from the banking system because of the Reserve Bank of India’s (RBI’s) move

The impact of this move on the profitability of banks this fiscal is unlikely to be material.

If rolled back by September 8, 2023 — the next potential review date for the measure — profit after tax for the banking system this fiscal would be impacted a bare 0.3%.

If it continues through this fiscal — a less likely scenario given deposit growth is yet to catch up with credit growth — the impact would be ~2%.”

Subha Sri Narayanan, Director, CRISIL Ratings Ltd