Repo Rate Cut by 40 bps, GSec at 5.98 perent, GDP to remain Negative for next Three Months; RBI Governor

In a press conference held a while ago, RBI Governor Shaktikanta Das announced various financial measures. While the repo rate is cut by 40 basis points to four percent and the reverse repo rate reduced to 3.35 percent, RBI has also extended moratorium on term loans by another three months. The decision was taken post the Monetary Policy Committee voted unanimously in a reduction of policy repo rate to revive growth and mitigate the impact of COVID-19. Post the lockdown began, RBI has slashed the repo rate by a huge 75 basis points and even announced a three-month moratorium to be given by banks to borrowers to ease their burden. Following the cuts in the key interest rates, loan EMIs are set to get cheaper that are linked to the marginal cost of funds-based lending rate of the lending banks.

He highlights that the GDP growth will remain negative, but will pick up in the second half of the year. The RBI Governor also mentioned that the

The decision was taken post the Monetary Policy Committee voted unanimously in a reduction of policy repo rate to revive growth and mitigate the impact of COVID 19

industrial production reduced by 17 percent in March due to the lockdown, while manufacturing activity lowered by 21 percent, and the output of core industries contracted by 6.5 percent. On a brighter side, India’s foreign exchange reserve increased by 9.2 percent during 2020-201 from April 1 onwards, and stood at $487 billion till May 15.

Shaktikanta also announces four policy decisions taken by MPC to tackle this crisis, which includes measures to improve functioning of markets, investments by FPIs by voluntary retention route, support to exports and imports and extension of measures to ease financial stress. RBI also allocates Rs.15,000 crore to EXIM banks to avail US dollar swap facility, while increasing the maximum permissible period of pre and post-shipment of credits from one year to 15 months.