Coronavius pandemic | RBI cuts repo rate by 75 basis points to 4.40%

India’s central bank cuts benchmark rate to decade-low 4.4%

Under the Pradhan Mantri Gareeb Kalyan Yojana (PMGKBY) the minister announced funds of Rs 1.7 lakh crore to help the ones with no resources. "The goal of this measure relating to the reverse repo rate is to make it relatively unattractive for banks to passively deposit funds with the Reserve Bank and instead, to use these funds for on-lending to productive sectors of the economy", Das said.

On October 4, the RBI cut its key lending rate by 25 basis points to 5.15 percent and triggered hopes for cheaper loans during the festival season. The decision for "a sizeable reduction" in the policy repo rate, according to the RBI Governor was taken to "revive growth and mitigate the impact of COVID-19 and ensure financial stability".

Speaking about the Indian economy, the RBI governor said that the GDP growth rate for the fourth quarter (Q4) of the financial year 2019-20 and 2020-21 are likely to be affected owing to the impact of Covid-19. Prime Minister Narendra Modi's government imposed a three-week long nationwide lockdown for its 1.3 billion people, the most far-reaching measure undertaken by any government to check the virus's spread. "This is now at risk from the pandemic's impact on the economy." the RBI MPC statement said.

In the wake of the coronavirus pandemic, the Reserve Bank of India (RBI) on March 27 cut the repo rate by 75 basis points to 4.40 percent versus 5.15% earlier.

Th central bank also permitted all banks and lending institutions to allow a 3-month moratorium on all loans.

Stating that the RBI is at work, the Governor said that the global slowdown can deepen with adverse implications for India. This measure will release another Rs. 1.37 lakh crore in the system.

The RBI also increased accommodation under the marginal standing facility from 2 per cent of SLR to 3 per cent. Das said that all this will inject Rs 3.74 lakh crore to the monetary system.

In addition, during the moratorium, not paying the EMI on any loan will not result in an asset classification downgrade. All these measures will not affect the credit history of the borrowers.

In what can be termed as a sense of relief for depositors, the Reserve Bank of India cleared the air about the dropping share prices amid the COVID-19 scare and reassured the depositors that their money would remain safe. "Depositors of commercial banks including all private banks need not worry about the safety of their funds", he said, while urging people and public authorities to not to resort to panic withdrawal of funds from banks. The outlook for the ongoing financial year will not be released by RBI but projections look negative, he said.

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