.... So, a cautious Subbarao doesn’t want to take any more chances. This time around, he is convinced that the ministry is serious about fiscal consolidation, but he wants to see the results before acting. That’s fine, but if he sees inflation as a greater evil than slowing growth, what was the need to cut CRR? More money in the system can stoke inflation. One explanation could be that RBI considers CRR a liquidity tool and not a monetary tool. Which is why it has continuously been slashing CRR and infusing money into the system on top of its bond buying programme, the so-called open market operations. It has also slashed banks’ statutory liquidity ratio, or the percentage of deposits banks have to invest in government securities, to ensure banks have more money to support credit growth..........
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