Corona Virus: RBI announced big measures to join COVID-19 fight with the world; allowed three months postponement on EMIs

Story Highlights
  • Global economy has entered recession amid coronavirus pandemic said IMF
  • India's (FY20) GDP growth projection of 5% is at risk due to coronavirus crisis

Delhi, India: RBI governor Shaktikanta das, on friday, announced that the monetary policy committee (MPC) has decided to cut repo rate by a whopping  75 basis points, which brings the repo rate down to 4.4 per cent from 5.15 per cent.

A moratorium of three months of EMIs on all outstanding loans was announced. The statement says: “All commercial, regional, rural, NBFCs and small finance banks are being permitted to allow 3-month moratorium on payment of instalments in respect of all term loan EMIs outstanding on March 31.”

The governor said that the economy needed “conventional, unconventional measures to combat virus” and that India’s growth outlook will now depend on the intensity, speed and duration of the pandemic

Apart from repo rate cut, the governor also announced that reverse repo rate will also cut down by a wider 90 bps to 4% in order make it unattractive for banks to passively deposit funds with RBI and instead lend it to the productive sectors.

It also announced that banks are permitted to allow a three-month moratorium for on payment of EMIs on all term loans that were outstanding on March 1. However the final decision will be rightly held with the concerned banks.

There were additional announcements related to other liquidity measures such as cash reserve ratio (CRR). “It has been decided to reduce the Cash Reserve Ratio (CRR) of all banks by 100 basis points to 3% of Net Demand and Time Liabilities with effect from the fortnight beginning March 28 for a period of 1 year,” the RBI governor announced.

Shaktikanta Das assured that to support the economy as long as required. “Tough times never last, only tough people and institutions do. The RBI is at work and at mission mode. Will do everything required to mitigate the effects of Covid-19 pandemic,” he said.

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