Coronavirus lockdown: RBI cuts reverse repo rate to 3.75 per cent

ST STAFF
Friday, 17 April 2020

Addressing the media, Governor said on April 14, International Monetary Fund released its global growth estimates, revealing that in 2020, the global economy is expected to plummet into the worst recession since 'The Great Depression'.

Reserve Bank Governor Shaktikanta Das on Friday announced a cut in the reverse repo rate from 4 per cent to 3.75 per cent. The RBI address comes a day after Prime Minister Narendra Modi met Finance Minister Nirmala Sitharaman to discuss the economic balance in the nation following the prolonged lockdown due to the novel coronavirus.

Addressing the media, Governor said on April 14, International Monetary Fund released its global growth estimates, revealing that in 2020, the global economy is expected to plummet into the worst recession since 'The Great Depression'.

RBI said that the 90-day NPA norm would not to apply on to the moratorium settled on the existing loans by banks. Governor also mentioned that the banks would not make any further dividend payout given the financial difficulties arising from the crisis.

He added that the LCR requirement of banks had been brought down to 80 per cent from 100 per cent. It will be re-established in phases by April next year.

The RBI Governor stated that the loans given by NBFCs to real estate companies would get a comparable benefit as given by the scheduled commercial banks. "The ways and means limit of the states have been raised to help them, not to bunch up their borrowing plans," said the RBI Governor.

The economic activity had come to a standstill during the prolonged lockdown.

Das said, "LTRO-2.0 will involve Rs 50,000 crore to begin with. Rs 50,000 crore special finance facility will be provided to financial institutions such as NABARD, SIDBI and NHB.

"CPI inflation declined in March and the inflation is on a declining trajectory. On the other hand, automobile production and sales have declined sharply in March. Electricity demand has fallen sharply. The impact of COVID-19 has not been captured in the IIP data for February," Das added.

He said that the IMF's projections of 1.9 per cent of the GDP growth for India are the highest among the G20. He praised banks and financial institutions and said that they have risen to the occasion to ensure normal functioning during the outbreak.

Prime Minister Narendra Modi on Thursday monitored the coronavirus’ effect on Indian economy and the option of a second stimulus package to boost sectors hit hard by the COVID-19. Many agencies, such as the World Bank and the International Monetary Fund, have cut their India GDP growth forecasts for 2020-21 after economic activity in the country halted.

 Already in his address on Tuesday, PM Modi expressed concern over the problems being faced by the poor. "The government has made every possible effort to help them through Pradhan Mantri Gareeb Kalyan Yojana. Their interests have also been taken care of while making the new guidelines," he had said.

To ease the pain, the Finance Minister last month also announced Rs 1.7 lakh crore stimulus that included free food-grains and cooking gas to the poor for three months.

The novel coronavirus has so far infected over 12,000 people in India and the death toll has crossed the mark of 400.

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