RBI to use cash reserve ratio as active liquidity tool

India's central bank plans to use the cash reserve ratio more frequently to manage liquidity and aid policy transmission, rather than deploying it only during extreme cash swings, a source told Reuters on Wednesday.

- Reuters

MUMBAI:

The person aware of the Reserve Bank of India's thinking declined to be identified because they are not authorized to speak to the media. The RBI did not reply to an email seeking comment. The central bank last week announced a surprise 100-basis-points reduction in CRR, the portion of deposits banks must park with the RBI, in four equal tranches, taking it down to 3%.

The move will release ₹2.5 lakh crore ($29.25 billion) into the banking system.

RBI governor Sanjay Malhotra had then said that the regulator was "comfortable" with a 3% CRR, but did not give other details.