India’s central bank cuts lending rate to 4% to aid economy

Marco Green
May 22, 2020

RBI cuts the repo rate by 40 bps to 4 per cent.

Secondly, the governor could announce the continuation of the liquidity support measures for banks to lend to non-banking finance companies and small industrial units in view of the prolonged stress in the economy.

However, he said that the combination of fiscal, monetary, and administrative actions will create conditions for the revival of the economy in the second half of FY21. Today's trials will be traumatic but together we will triumph, says Das. The deadline of the earlier moratorium was May 31.

The loan moratorium will be extended till August 31 making it a six-month moratorium in all, Das said. Deferment of interest on working capital 3.

RBI allocates Rs 15,000 crore to EXIM banks to avail United States dollar swap facility. This will have a rollover facility to upto one year.

RBI Governor Shaktikanta Das on May 22 announced an extension of the moratorium on term loan EMIs by three months. He added that an improvement in passing on a lower rate to borrowers has been noticed across various business segments.

This will be the third presser of the RBI governor on the central bank's measures to address COVID-19 crisis.

The RBI Governor also expressed hope that the inflation would be brought under control in the second half of the fiscal.

India's gross domestic product (GDP) growth will be in negative territory in 2020-21 as the outbreak of coronavirus has disrupted economic activities.

Food inflation is now under pressure, RBI Governor Shaktikanta Das said that food inflation which had eased from January 2020 peak in February and March has now surged to 8.6 percent in April.

The Governor also said that consumer durables production fell by 33 per cent in March 2020 as a result of the private consumption slump.

"India is seeing a collapse of demand". This, he said, has taken a toll on fiscal revenues. On Marc 27, Das announced a Rs 3.74 lakh crore (1.8% of GDP) package, which included Targeted Long-Term Repo Operations (TLTRO) worth Rs 1,00,000 crore; Cash Reserve Ratio (CRR) was cut by 100 basis points to 3 per cent; and accommodation under Marginal Standing Facility was hiked from 2% of Statutory Liquidity Ration to 3%: Rs 1,37,000 crore.

The decision was taken by the Monetary Policy Committee (MPC) of the central bank today after a three-day long meeting. This was done for past three days.

Other reports by Click Lancashire

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