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Right after finance minister Nirmala Sitharaman announced a 1.7 lakh package relief to those hit the hardest by the lockdown imposed by the government amid the Covid-19 outbreak, the Reserve Bank of India (RBI) too has leapt into the breach and slashed the repo rate 75 basis point–bringing it to the lowest ever 4.4%.

The last time the repo rate had plummeted to the lowest levels was in April 2009 due to the global economic crunch. It stood at just 4.74%.

Explaining the stance on the development, the RBI Governor Shaktikanta Das said that the RBI has switched to the accommodative mode for as long as required to boost the economy. The cash reserve ratio (CRR) has also come down to 3% with effect from March 28, 2020, after the central bank slashed 100 basis points.

The decision of such a massive cut down on the interest rates was taken by the central bank after a detailed review of the policy. The Monetary Policy Committee too held several meetings over the past few days to blunt the effects of the lockdown. Four out of its six members voted in favor of the cut-down.

“We need to be always battle-ready,” said Governor Shaktikanta Das in a statement, adding that “tough times never last. RBI is on a mission mode and will ensure the normal functioning of the markets.” Responding to the development, Sitharaman hailed the decision and said that it is a wise step to boost the economy and bring in financial stability.

“Time has come for RBI to unleash an array of instruments to expand liquidity in the system sizeably and to improve monetary transmission,” added the Finance Minister.

The RBI has also asked lending institutions and banks to offer a moratorium of 3 months on repayment of all types of loans.

“It is important to mitigate the burden of debt servicing now,” the RBI Governor was quoted as saying during the press conference.

Owing to its aggressive liquidity management measures over the past few days, the RBI has injected around INR 3.80 lakh crore liquidity into the system. Indian economists world over have praised the decision and think that this will alleviate the stress significantly.

 

Key Highlights of What RBI Has Done to Mitigate the Covide-19
Impact

 

• Slashed 75 basis points to bring repo
  rate to bring it to the lowest ever 4.4%.
• Cut down CRR by 100 basis points to
  bring it to 3% with effect from March 28, 2020.
• Infused INR 3.89 lakh crore liquidity
  into the system.
• Asked lending institutions to offer a
  moratorium of 3 months on repayment of all types of loans.
• Cut down reverse repo rate by 90 basis
  points.
• Ensured depositors that their money is
  safe in the banks.

 

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