RBI joins coronavirus fight; EMIs put on hold, big-bang rate move
Reserve Bank of India governor Shaktikanta Das in a press meet announced a massive effort of 75 basis points cut in repo rates to counter the economic slowdown caused by the COVID-19 pandemic.
The reverse repo rate which has been reduced by 90 basis points to 4 percent is performed to make banks lend funds to the productive sectors instead depositing to the RBI. The unprecedented measures come just after Moody’s Investors Service cut India’s growth forecast for the present year to 2.5 percent from 5.3 percent.
A moratorium that stretches three months of EMIs on all outstanding loans was announced through a
statement that permits all commercial, regional, rural, NBFCs and small finance banks.
It clarifies that there would not be deduction of EMI from anyone’s account with an outstanding loan until the moratorium period gets over. This is applicable for corporate loans, home loans, and car loans, barring credit card dues since it won’t come under term loan.
“I appreciate all the needful measures took by the RBI Governor. This is the way to go and is a progressive and timely measure,” commented NITI Aayog CEO Amitabh Kant.
Das said that the funds at banks are safe, and no need for panic withdrawal. He also announced that a liquidity measure of Rs 2.8 lakh crore is been underway. “The growth, intensity and time span of the pandemic make the standpoint heavily fortuitous. There is a high possibility that the majority of the world will slip into recession,” expresses Das.
In the past one year, RBI has been cutting policy rates five times which was put on hold since December in the light of high inflation. It was earlier this week RBI’s monetary policy committee (MPC) had held an unscheduled meeting to focus its attention over the possible measures to roll out during the emergency. Ever since the countrywide lockdown has been put, hundreds of thousands of daily wage workers as well as business houses have been hit severely.
As per the RBI rules, the default in the payments, if any, has to be recognized within a 30 days’ time and classified as special mention accounts. Experts have commented that it is to ensure that businesses survive the virus hit, even at the expense of banks for the time being.