Banking Daily News: 15th AUG 2023

Banks Pull Funds for I-CRR; Liquidity Hit

Indian private banks have redeemed approximately ?3,000 crore from liquid mutual funds to adhere to the RBI's temporary I-CRR rule, impacting their liquidity. The I-CRR requires banks to keep added reserves with RBI based on deposit growth. Though this has resulted in mutual fund redemptions, experts opine that the overall banking liquidity remains adequate for credit requirements.

Key Facts:

• Massive Redemption: Private banks withdrew about ?3,000 crore from liquid mutual funds for I-CRR compliance.
• I-CRR Rule: This RBI provision requires banks to maintain extra cash reserves based on deposit growth between specific periods.
• Liquidity Impact: The action has squeezed the banks' immediate liquidity, leading to mutual fund redemptions.
• Temporary Measure: The I-CRR mandate is a transient move by RBI.
• Optimistic Outlook: Banking experts anticipate that system liquidity remains sufficient for ongoing credit demands.

RBI Pilots Seamless Credit Tech

The Reserve Bank of India (RBI) has initiated a pilot project slated for August 17, focusing on a cutting-edge platform designed to facilitate frictionless credit transactions. This endeavor aims to revolutionize the credit mechanism by leveraging technology to smoothen and hasten processes.

Key Points:

• Innovation Drive: RBI embarks on a pilot for a tech-driven platform promoting seamless credit transactions.
• Launch Date: The innovative initiative is set to commence on August 17.
• Tech Advantage: The platform intends to utilize advanced technology to streamline and expedite credit processes.
• Future Implications: If successful, this could overhaul India's credit system, making it more efficient and accessible.
• Stakeholder Watch: Financial institutions and tech enthusiasts await outcomes, anticipating significant positive ramifications for the banking and credit landscape.

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