RBI cut cash crunch at Nandigsram Cooperative Bank in Kutch by 30% on January 1, 2017.
The bank has a balance of Rs 10,500 crore and a balance loan of Rs 2.5 lakh crore.
The RBI said that in the three months to 31 March, it had cut cash by about Rs 10 lakh crore, bringing the total cash available to the bank by the end of the quarter to about Rs 13,600 crore.
This was a significant relief to the borrowers and the bank was able to take advantage of the relief to extend the loan to them.
On the other hand, the RBI reduced the bank’s total cash reserve by about 1,200 million shares of stock.
The share cap has been cut to Rs 6,000 crore from Rs 8,000 crores.
Banks have been facing cash crunch issues for a while now.
In the last three months, there has been a sharp rise in interest rates and the RBI is trying to find a way to help the sector.
The Reserve Bank has cut interest rates on loans of Rs 1 lakh crore and on deposits of Rs 500 crore in the last month, with the effect that the rates have fallen from 8.25% to 7.5%.
In a statement, RBI governor Raghuram Rajan said that the banks are able to meet the needs of their customers at low interest rates as well as with minimum capital contribution, while also providing better access to finance for borrowers and investors.
The Reserve Bank also said that it has been providing a number of liquidity assistance programmes to lenders.
(With inputs from agencies)