• search
For Quick Alerts
Subscribe Now  
For Quick Alerts
ALLOW NOTIFICATIONS  
For Daily Alerts

RBI ramps up economic support amidst coronavirus outbreak

|

Mumbai, May 22: The Reserve Bank of India (RBI) on Friday slashed interest rates, extended moratorium on loan repayments and allowed banks to lend more to corporates in an effort to support the economy which is likely to contract for the first time in over four decades.

RBI ramps up economic support amidst coronavirus outbreak

The benchmark repurchase (repo) rate was cut by 40 basis points to 4 per cent, Governor Shaktikanta Das said announcing the decisions taken by the central bank's Monetary Policy Committee (MPC) that met ahead of its scheduled meeting in early June.

Highlights: RBI cuts repo rate by 40 bps; extends loan moratorium till August

    RBI slashes repo rates by 40 basis points to 4% to boost growth, other measure

    Consequently, the reverse repo rate was reduced to 3.35 per cent from 3.75 per cent.

    He said the MPC had voted to maintain its accommodative stance, implying more rate cuts in the future if the need arises.

    The RBI supplemented the interest rate cut by extending by three months the permission given to all banks to give a three-month moratorium on payment of monthly instalments on all outstanding loans, providing relief to home and auto buyers as well as real estate sector where construction activities are already at a standstill.

    The moratorium on interest on working capital was also extended by three months.

    Also, interest accumulated for the six-month moratorium period can be converted into a term loan, Das said.

    Further, bank exposure to corporates has been raised to 30 per cent of the group's net worth from the current limit of 25 per cent, a move that will allow lenders to give larger loans to companies.

    In its first official forecast for economic growth, the central bank has said the gross domestic product (GDP) is likely to contract in FY21 (April 2020 to March 2021).

    Das said the inflation outlook is highly uncertain due to the outbreak of the COVID-19 pandemic and expressed concern over elevated prices of pulses.

    He also said there is a need to review import duties to moderate prices.

    Headline inflation may remain firm in the first half of the year and may ease in the second half. Inflation may fall below 4 per cent in the third or fourth quarter of the current fiscal, according to the Governor.

    This is the second straight cut in interest rates in two months. On March 27, RBI had cut interest rates by 75 basis points.

    Coronavirus crisis: RBI Governor extends moratorium period by 3 months

    "After extensive discussions, the MPC voted unanimously for a reduction in policy repo rate and for maintaining the accommodative stance of the monetary policy as long as necessary to revive growth and to mitigate the impact of COVID-19 while ensuring that inflation remains within the target," Das said.

    The central bank will remain vigilant and in battle readiness to address dynamics of unknown future arising from COVID-19 outbreak, he added.

    For Daily Alerts
    Get Instant News Updates
    Enable
    x
    Notification Settings X
    Time Settings
    Done
    Clear Notification X
    Do you want to clear all the notifications from your inbox?
    Settings X
    X
    We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Oneindia sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Oneindia website. However, you can change your cookie settings at any time. Learn more