Reserve Bank of India (RBI) Governor Shaktikanta Das has announced a reduction in the repo rate to 4 percent and an extension of three months on loan moratorium,n a move to ease the financial stress on the nation caused by the Covid-19 pandemic and lockdown for over two months.
Reducing the repo rate that results in the reduction in the key interest rate at which RBI lends money to commercial banks will lessen their burden on the loan moratorium or delayed EMI payments. To balance out to the reverse repo rate has been pulled to 3.35 percent from the existing 3.75 percent.
According to the governor, the GDP growth is expected to remain in the negative territory for the current financial year and headline inflation will only ease in the latter half of the year.
The central bank rolled out these measures and, in future more monetary, fiscal, and administrative measures to improve the functioning of markets, to support exports and imports, to ease the financial stress on state governments and to give better access to working capital. The apex bank believes these measures will help in the gradual revival of the Indian economy.
Five members of the Monetary Policy Committee (MPC) voted in favor of rate reduction, said Das in the video address.
The World Economic Forum after conducting a survey recently and said that the world would witness a prolonged global recession with bankruptcies, failure o industries, and a spike in unemployment. In India, the RBI governor shared, industrial production shrank by 17% in March, while exports were all-time low in the last 30 years.