Hi The cradle cap in newborns is generally a type of seborrhoeic dermatitis and is often related to over secretion of sebaceous glands in the scalp skin or it may follow a fungal infection. The treatment consists in washing with a mild baby shampoo and avoid applying too much oil. The condition,if mild disappears with this treatment. However if it is spreading,thick crusts are seen then anti-fungal lotion like 1% Clotrim or miconazole may be applied for 2 weeks. If the lesion is cracked and bleeds, you should consult a pediatrician who may recommend you antibiotics and appropriate local application.