The debate will continue......
......It fulfils an important regulatory function in countries such as India where the Open Market Operations (OMO) that central banks use to check liquidity face some structural rigidities. Central banks rely on CRRs to check inflation by varying money supply. An increase in CRR lowers the multiplier, and, hence, the growth of money supply. The opposite result happens when the CRR is lowered. Banks ought to view the zero interest on CRR balances as a fee paid to the RBI for its supervisory function. Banks alone can mobilise low-cost savings and current account deposits. Mutual funds, NBFCs and insurance companies do not have access to such funds. So, banks are not disadvantageously placed in having to meet CRR obligations......
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