Why we need a large CRR slash, not a rate cut

.....A rate cut without comfortable liquidity conditions is unlikely to lead to significant reduction in lending rates. Therefore, even if the RBI chooses to cut the repo rate on June 18, it may not be very effective without easier liquidity conditions than what exist now. A lower CRR will also increase RBI’s ability to intervene in the forex market without putting too much strain on inter-bank liquidity. A large CRR cut would allow banks to cut their lending rates immediately, while only a 25 bps cut may only have a salutary impact on lending rates.......

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