Growth in 2020-21 is expected to be negative, Reserve Bank of India Governor Shaktikanta Das said while announcing a host of policy and regulatory measures in his latest statement outlining the central bank's response to the ongoing pandemic.
Among these measures, the most prominent of them are cuts to the repo rate, the reverse repo rate, and to the bank rate and marginal standing facility. On a regulatory front, the RBI has permitted banks to extend the loan repayment moratorium by another three months.
"Given all these [lockdown and social distancing] uncertainties, GDP growth in 20-21 is estimated to be in negative territory", he said, stopping short of giving an estimate.
This is Das's third address to the press since the lockdown began on March 25. On March 27, the RBI undertook a cut in the repo rates (reverse repo to 4%, repo to 4,4%), the cash reserve ratio and introduced the moratorium for the first time. On April 17, the reverse repo rate was further cut by 25 bps to 3.75%.
His address comes five days after Finance Minister Nirmala Sitharaman announced the final tranche of the mega 'Aatmanirbhar Bharat Abhiyaan' economic package aimed at reform to induct self-reliance in and to jump start the economy after the lockdown.
BOOM lists all you need to know about the these latest announcements
1. Policy rate cuts
The RBI's monetary policy committee voted unanimously to cut the policy repurchase (repo) rate in an off-cyclical meeting. The MPC also voted 5 to 1 to cut the repo rate by 40 basis points (bps): from 4.4% to 4%. The dissenter, Dr. Chetan Ghate on the MPC, voted for a 25 bps cut. A hundred bps is equal to one percentage point.
- The marginal standing facility and bank rate were reduced from 4.65% to 4.25%
- The reverse repo rate was reduced from 3.75% to 3.35%
The repo rate is the rate at which the RBI lends to commercial banks on a short term basis. The reverse repo rate is the rate at which banks lend to the RBI, again on a short term basis.
2. An extension of the repayment moratorium
On March 27, the governor permitted banks to extend a loan repayment moratorium facility to its borrowers across their entire credit product portfolio. Under this, borrowers whose cashflows had been hit due to the lockdown could defer payments on installments falling in three months (March, April and May) without these missed payments adversely affecting their credit standing. This moratorium has been extended for another three months, up to August.
3. Help to state governments
The criteria for withdrawal from the Consolidated Sinking Fund has been relaxed, and it will be ensured that the withdrawal of funds from here are done judiciously. This will help state governments meet 45% of their redemption needs in FY 20 - 21.
4. More support to institutions
The RBI extended a ₹15,000 crore line to EXIM Bank of India for 90 days, with a rollover to 1 year. Further, a ₹15,000 crore extension to SIDBI for 90 days will automatically rollover for for another 90 days.
5. Support to exporters
The RBI has increased export credit period from 1 year to 15 months.
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