Kolkata: The cash reserve ratio is not just a liquidity tool but a monetary policy signal, a deputy governor of the Reserve Bank of India (RBI) said on Wednesday amid market speculation it may lower the ratio in order to ease tight liquidity in the banking system.

A file photo of RBI deputy governor Subir Gokarn.

“Whether using an instrument that is part of monetary toolkit to address liquidity issue is certainly a debate which we have to engage in," he said in an address to bankers.

Cash reserve ratio is the proportion of deposits that banks need to set aside with the central bank as cash. The ratio now stands at 6%.