RBI reduces repo rate by 75 bps to 4.4%

RBI Governor: Banks, NBFCs to get 3-month moratorium on payment for all term loans; deposits safe in private banks

India cuts repo rates to 4.4% to ease coronavirus impact

The RBI cut reverse repo rate by a bigger margin of 90 basis points to disincentivize banks to hoard money. The reverse repo rate was reduced 90 basis points to 4%.

While the apex bank's governor did not divulge growth projections, Moody's slashed India's GDP growth in 2020 to 2.5 per cent. It will release Rs 1.37 lakh crore into the system.

According to historical data since 2003 provided by RBI, the lowest interest rate was 4.75% from 2009 to 2010, just after the global financial crisis.

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

The great EMI relief A moratorium of three months of EMIs on all outstanding loans was announced.

"Moratorium on term loan, deferring of interest on working capital will not classify as default, will not impact credit history of the borrower", the RBI said. "It will not be treated as NPA", the RBI Governor said.

He said protecting the domestic economy from the pandemic was a top priority. Keeping finance flowing is the paramount objective of the RBI. Indian bank system is safe and sound. "The public should not worry about their deposit in private sector banks, they should not resort to panic withdrawal", said Das. Offshore Rupee NDF Market has been growing rapidly. Net Stable Funding Ratio (NSFR) was required to be introduced from April 1, 2020.

Incremental CCB (capital conservation buffer) implementation deferred from 30 March, 2020 to 30 September 2020.

"Large sell offs in markets have intensified pressure".

Stating that the RBI is at work, the Governor said that the global slowdown can deepen with adverse implications for India. Measures have also been announced to ensure liquidity.

"India has locked down economic activity".

On March 26, Centre announced several measures including direct cash transfers and distribution of free food grains for a period of three months to help the economically weaker sections (EWS) of the society during the crisis phase.

RBI calls war Make no mistake, it is a fight never seen before, the RBI governor warned while outlining the risks to Indian economy from coronavirus. He said the MPC voted for sizeable reduction in repo rate to revive growth, mitigate covid-19 impact.

The meeting of the six-member MPC took place virtually, and for the first time outside its bi-monthly calendar since the committee was formed in February 2016. One bps is one hundredth of a percentage point.

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