Reserve Bank of India Governor Sanjay Malhotra’s remarks in his CNBC-TV18 interview reveal a subtle but meaningful shift in the central bank’s stance on the Cash Reserve Ratio. Once treated as a blunt instrument reserved for crises, CRR is now being framed as a standard part of the RBI’s liquidity management toolkit, something to be deployed with care but normalised as part of regular policy operations.Malhotra was unequivocal in clarifying CRR’s purpose: it is not a prudential tool like the Liquidity Coverage Ratio, but a systemic liquidity management lever available to the central bank. In the past, the RBI has used this tool sparingly. Even through the disruptions of COVID-19, it resisted frequent CRR adjustments, aware of the powerful signal such moves send to markets about systemic liquidity conditions.
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