RBI Policy Meet: RBI Joins the COVID-19 Fight with big-bang rate move

RBI Joins The COVID-19 Fight

The Reserve Bank of India warned that the country is facing a war like situation and outlined the risks to Indian economy from coronavirus. He announced reduction in the policy repo rate and maintaining an accommodative stance as long as necessary.

Decisions Taken By Monetary Policy Committee

  • The MPC has decided to permit all banks and registered lending institutions to allow three months suspension on payment of due installment of loan EMIs as of 31st March 2020. 
  • The three months suspension of loan EMIs will apply to home, corporate, car and personal loans.
  • The MPC reduced its Repo Rate by 75 basis points bringing it down to 4.4%.
  • The Reverse Repo Rate was reduced by 90 basis points bringing it down to 4%.
  • The MPC has suggested three ways to inject liquidity in the economy:

– By auctioning of Targeted Long Term Repo Rate( TLTRO) upto  3 years for a total amount Rs 1,00,000 crore at floating rate.

– By reducing the Cash Reserve Ratio for all banks by 100 basis points to 3% of Net Demand and Time Liabilities(NDTL).  The reduction in CRR will release Rs 1,37,000 crore across the banking system.

– By accommodation under Marginal Standing Facility to be increased from 2% from SLR to 3% with immediate effect till June 30. 

Asia’s third largest economy is facing a lockdown which resulted in crisis and loss of confidence in the financial system by investors.

RBI governor Shaktikanta Das has predicted that the world is approaching a big recession and the impacts of recession on India will depend upon how it responds to the current situation generated by the COVID-19 pandemic.

The intent shown by the RBI to battle long-term impacts of the ongoing crises along with sound economic relief packages will lift the confidence of parties involved directly or indirectly to financial markets in coming days.


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