The Reserve Bank on Wednesday permitted banks to include now-defunct Rs 500 and 1,000 notes as part of their cash balance, a move that may provide relief to banks.
"In the wake of deposits of Specified Bank Notes (SBNs) in massive quantity, it has been decided that SBNs deposited in the currency chests since November 10 will be considered part of the chest balance in the soiled note category," RBI said in a notification.
However, such deposits will not be reckoned for calculating chest balance limit or Cash Holding Limit, it said.
The notification further said RBI will review the decision in the second half of February.
According to analysts, the move will help banks adhere to RBI's sharp hike in CRR announced last week.
In a surprise move on November 26, RBI raised the cash reserve ratio (CRR) of banks to 100 per cent of total deposits.
The higher CRR is applicable on incremental deposits raised between September 16 and November 11, 2016. That would mean deposits of Rs 3.2 lakh crore that accrued to banks during this period will be impounded by RBI.