In a bid to address the economic concerns due to COVID-19, the Reserve Bank of India (RBI) Governor Shaktikanta Das today slashed the reverse repo rate by 25 basis points to 3.75 per cent, repo rate remains unchanged at 4.40 per cent. Last month, the RBI had advanced its monetary policy committee (MPC) meet where they had cut the repo rate by 75 basis points.
“It is during our darkest moments that we must focus on the light.”
– RBI Governor Shaktikanta Das
The RBI governor quoted Mahatma Gandhi’s address at Kingsley Hall, London in October 1931, where he said, “In the midst of death life persists, in the midst of untruth truth persists, in the midst of darkness light persists.”
The RBI governor today also announced a fresh targeted long term repo operation (TLTRO) of ₹ 50,000 crores to address the liquidity concerns of mid and small size banks and firms. There are various media reports that the Government may announce another economic relief package.
Highlights
- Reverse repo rate further slashed by 25 basis points to 3.75 per cent to encourage the banks to lend.
- TLTRO of ₹ 50,000 crores for small and mid-size NBFCs and manufacturing units. The banks will have to disburse the funds in a month’s time.
- RBI has announced ₹ 25,000 crores to NABARD, ₹ 15,000 crores to SIDBI, and ₹ 10,000 crores to NHB.
- Non-performing assets (NPA) classification will exclude the 3-month moratorium period. NBFCs can also extend this facility to its borrowers.
- Scheduled commercial banks will not have divided payouts from profits for FY 2019-20. This will be reviewed after September 30, 2020.
- As per IMF estimates, India’s growth rate is expected to be the highest among G20 nations.
- As per IMF estimates, the cumulative loss to global GDP is expected at $9 trillion – greater than the combined economies of Japan and Germany.
- A sharp decline in Services Purchasing Managers’ Index (PMI) due to export restrictions.
- Ways and Means advances (WMA) limit of states increased by 60 per cent.
The RBI Governor also said that they will more measures if needed. Read more about the instruments of monetary policy.