Covid-19 relief: RBI cuts repo 75 bps; defers term-loan EMIs for 3 months
The Reserve Bank of India (RBI) on Friday
went all guns blazing to arrest a potential slowdown caused by the coronavirus
(Covid-19), lowering the policy repo rate by 75 basis points to 4.4 per cent.
"Given the Covid-19 stress, the
six-member monetary policy committee (MPC) advanced their March 31-April 3
meetings to meet on March 24-26 and 27, and voted 4:2 to cut the policy repo
rate to 4.4 per cent", Reserve Bank of India Governor Shaktikanta Das, who
addressed the media through video streaming, said.
At the same time, the reverse repo
rate, which is the rate at which banks keep their excess funds with the RBI,
was lowered by 90 basis points to discourage banks from keeping their excess
liquidity with the central bank. The idea is that banks must lend funds for
productive needs.
Apart from the rate cuts, the central
bank also announced a number of liquidity infusion measures, putting Rs 3.74
trillion of liquidity in the banking system. The total liquidity infusion by
the central bank due to coronavirus stress now amounts to an unprecedented Rs
6.5 trillion.
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