The Reserve Bank of India has cut the Repo Rate by 75 basis points to 4.4 per cent and the Reverse Repo Rate by 90 basis points to 4 per cent.
In view of the coronavirus crisis, the Reserve Bank of India governor Shaktikanta Das on Friday announced a cut of 75 basis points in Repo Rate, bringing it down to 4.4% from 5.15%. The Reverse Repo Rate has also been slashed by 90 basis points to 4%.
Das informed that RBI's Monetary Policy Committee (MPC) voted for a huge reduction in repo rate in order to mitigate economic risks during the COVID-19 crisis in the country.
“The Monetary Police voted to reduce repo rate by 75 basis points to 4.4 per cent. The reverse repo-rate reduced by 90 basis points to four per cent,” Das said at a media briefing in New Delhi.
The governor also informed that Cash Reserve Ratio (CRR) of all banks reduced by 100 basis point to 3% from March 28, 2020, for a period of 1 year. The step will release 1.37 lakh crore.
“It will now be unproductive for the banks to park money with the RBI, they will have to give it to the people,” said Das.
Altogether, these measures will release a total of Rs 3.74 lakh crore in the system and ease the pressure on banks.
The central bank also permitted all banks and lending institutions to allow a 3-month moratorium on all loans. "All lending institutions are allowed to defer interest on working capital repayments by three months. The moratorium on term loans, deferment of interest payment will not result in asset classification downgrade and banks may reassess the working capital cycle. It will not be treated as NPA," the RBI Governor said.
Announcing other measures, he said, ''Incremental CCB (capital conservation buffer) implementation deferred from March 30, 2020, to Sep 30, 2020. Offshore Rupee NDF Market has been growing rapidly. Net Stable Funding Ratio (NSFR) was required to be introduced from April 1, 2020. Will defer NSFR implementation to October 2020.''
"Large sell-offs in markets have intensified pressure. RBI will conduct auctions of long term repo operation (LTRO) of three-year tenure up to Rs1 lakh crore at a floating rate linked to the policy rate," the RBI Governor stated.
Das further said that the outlook remains extremely uncertain at the time and going forward much will depend on how India battles COVID-19 pandemic. He also asked people not to panic about their money in private sector banks.
"Priority is to undertake strong and purposeful action to protect the domestic economy, Need for all stakeholders to fight against the pandemic and banks should do all they can to keep credit flowing. 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.
“Tough times never last, only tough people and tough institutions do,” he added.
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.
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