Exclusive-India’s central bank to use cash reserve ratio more actively to manage liquidity, says source

By Siddhi Nayak and Swati Bhat

MUMBAI (Reuters) -India’s central bank plans to use cash reserve ratio “more often” as a tool to manage liquidity and speed up monetary policy transmission, moving away from the practice of deploying it only in times of extreme cash swings, a source told Reuters on Wednesday.

The person aware of the Reserve Bank of India’s thinking declined to be identified because they are not authorised to speak to the media. The RBI did not reply to an email seeking comment.

In a surprise move on Friday, the Reserve Bank of India announced a 100-basis-points reduction in the CRR to 3%, to be implemented in four equal tranches between September and November, releasing 2.5 trillion rupees ($29.25 billion) into the banking system.

($1 = 85.4790 Indian rupees)

(Reporting by Siddhi Nayak and Swati Bhat; Editing by Nivedita Bhattacharjee)