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Financials

India's RBI imposes higher cash reserve ratio on banks

NEW DELHI, Nov 26 (Reuters) - The Reserve Bank of India asked banks to maintain an incremental cash reserve ratio of 100 percent to absorb excess banking system liquidity after government’s move to withdraw large denominated currency notes sparked a surge in bank deposits.

The central bank asked banks to maintain the incremental reserve ratio from the two-weekly cycle starting Nov. 26, it said in circular on Saturday.

The RBI said the overall rate for the cash reserve ratio remained unchanged at 4 percent.

The RBI said the move is “intended to be a temporary measure” and will be reviewed on Dec. 9 or earlier.

To tackle the surge in banking system liquidity the central bank relaxed its liquidity auction rules by expanding its basket of securities that it accepts as collateral.

Reporting by Neha Dasgupta

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