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General News RBI announces massive cut in repo rate, pauses loan EMIs

RBI makes BIG-BANG move to fight COVID-19 fallout: Announces massive cut in repo rate, pauses loan EMIs

[Image: shaktikanta-das-rep-1-1585283856.jpg]

A day after Finance Minister Nirmala Sitharaman announced ₹1.7 trillion stimuli for economy hit and bruised by novel coronavirus pandemic, Reserve Bank of India governor Shaktikanta Das announced series of big-bang moves to further de-stress the impact from 21-day lockdown. RBI governor announced a massive 75 basis points cut in repo rate and further 90 basis points cut in reverse repo rate (which sets the floor of the liquidity adjustment facility (LAF) corridor). Repo rate is the key interest rate at which the RBI lends short-term funds to commercial banks. Shaktikanta Das also announced a 100 bps cut in cash reserver ratio (CRR) to bring more liquidity in the system. To ease the pressure on people who were staring at loan defaults, RBI asked banks to announce a 3-month pause on all EMIs. The RBI Governor further said that macroeconomic fundamentals are stronger than those in the aftermath of the 2008 financial market crisis adding that the banking system in India is safe, deposits are safe in private banks, therefore, the public should not resort to panic withdrawal. Das added that living in an extraordinary situation, war effort needs to be mounted against coronavirus using conventional, unconventional tools. He further added that the RBI is at work and is calibrating action to meet any liquidity mode. The global slowdown can deepen with adverse implication for India, however, crude oil slump an upside indication for the country.

RBI announces massive cut in repo rate; 3 months moratorium for loan EMIs | Key Takeaways

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