CRR cut conceptually flawed

Rather than prescribe the wrong medicine, it is better not to prescribe any medicine. This aptly applies to the Reserve Bank of India’s decision to opt for a reduction in cash reserve ratio in its mid-quarter review. This move was uncalled for, going by both theory and the ground realities. Let us first look at the latter. The arguments offered by the central bank to defend its policy move rest on three grounds.

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