- RBI Governor announces to lowest ever cut repo rate by 75 basis points to 4.4%,
- Lowers reverse repo rate by 90 basis points.
- Central Bank cuts the Cash Reserve Ratio by 100 bps to 3%,
- Central Bank announces to unlock ₹ 1.37 lakh crore liquidity
- All Commercial Banks, Co-oporative Banks, All India Financial Institutions and Non-Banking Financial Company, to allow a moratorium of 3 months on repayment of term loan outstanding on March 1, 2020.
- The repayment schedule and all subsequent due dates, as also the tenor for such loans may be shifted across the board by 3 months.
- EMI repayments of loans taken would not be deducted from their bank accounts till the moratorium period is over.
The Reserve Bank of India (RBI) governor finally announce in his press conference on Friday and answer to the COVID-19 crisis with 75 basis points cut in the repo rate, lowest ever from 4.74% in April 2009 to down recently 4.4 %
Whereas the central bank also cut the cash reserve ratio or CRR by 100 basis points to 3% with effect from March 28, 2020, and unlocking ₹ 1.37 lakh crore primary liquidity in the banking system. The Reverse Repo Rate was also lowered by 90 basis points.
The central bank advanced the policy review and the Monetary Policy Committee met over March 24, 25 and 26 to analyze the situation caused by the unprecedented lockdown of the nation and all business activities, before responding with the massive rate cut.
The rate cut was warranted by the disruptive force of corona-virus, the central bank said. Four of six monetary policy committee members voted in favour of the rate cut.
RBI announcement, the Finance Minister said the cut-rate will encourage growth and ensure financial stability.
Finance minister said that “Time has come for RBI to unleash an array of instruments to expand liquidity in the system sizeably and to improve monetary transmission,”
RBI also allowed banks and other lending institutions like NBFC to extend the repayment schedule and moratorium by 3 months to avoid large Non-performing assets (NPAs). This would apply to all term loans as RBI also allowed all lending institutions to allow a moratorium up to 3 months for all loans outstanding as at March 1, 2020.
RBI has also allowed banks to give a 3 months moratorium for all term loan repayments without negatively impacting the asset book of the banks and credit score (CIBIL) of the borrowers.
RBI governor Shaktikanta Das said that “The steps to ease working capital pain, reduce liquidity costs and provide a moratorium on term loans will alleviate stress across various sectors. We continue to see rates dropping to 3.50% by August 2020,”