A hike in the cash reserve ratio (CRR) is the last option on the Reserve Bank of India’s (RBI) table to sterilise the avalanche of liquidity in the banking system, because it will be detrimental to growth and contrary to the benign interest rates projected by the central bank, economists said. The banking system is flush with Rs 4.44 lakh crore of excess liquidity, as people have flocked to deposit their old Rs 500 and Rs 1,000 notes, while there are restrictions on how much an individual can withdraw.

A debit card cannot withdraw more than Rs 2,500 per day, while individuals can withdraw Rs 24,000 in cash from their savings bank accounts each week.Banks can park their excess cash with the RBI through the reverse repo window in exchange for securities. On Thursday, for example, banks deposited Rs 80,000 crore with the RBI through the overnight window.

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http://economictimes.indiatimes.com/news/economy/policy/rbi-may-hike-crr/articleshow/55609346.cms

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