Thursday, April 16, 2020

RBI cuts reverse repo rate from 4% to 3.75%

RBI Governor Shaktikanta Das announces a new set of regulatory measures to deal with financial challenges posed due to COVID-19. Speaking on the pandemic crisis, Das said:

-- IMF Economic Counsellor has named it 'The Great lockdown' estimating cumulative loss to global GDP over 2020-21 at around 9 trillion US dollars, which is greater than the economies of Japan & Germany combined.

-- Contraction in exports in March 2020 at 34.6%, turned out to be much more severe than during the Global Financial Crisis. However, amidst all this, the level of Forex Exchange Reserves which we have continue to be robust.

-- It has been decided to reduce the fixed reverse repo rate under liquidity adjustment facility (LAF) by 25 basis points from 4% to 3.75%, with immediate effect. Reverse repo rate is the rate at which the RBI borrows money from commercial banks. A decrease in the reverse repo rate will increase the money supply.

-- 90-day NPA norm not to apply on moratorium granted on existing loans by banks. 

-- Banks not to make any further dividend payout in view of financial difficulties arising from Covid-19.

-- CPI inflation declined in March; inflation is on a declining trajectory.

-- Loans given by NBFCs to real estate companies to get similar benefit as given by scheduled commercial banks.

-- RBI will monitor evolving situation continuously, use all its tool to deal with pandemic fallout.

-- LCR requirement of banks brought down to 80% from 100%; to be restored in phases by April next year.

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