RBI governor Shaktikanta Das on Friday announced that its Monetary Policy Committee (MPC) voted for a massive reduction in repo rate and the Cash Reserve Ration (CRR) to mitigate economic risks amid COVID-19.
The RBI’s MPC has voted in favour of an interest rate cut to the tune of 75 basis points, which brings the repo rate down to 4.4%. The reverse repo rate has also been reduced by 90 basis points to 4% in a bid to maintain financial stability and revive growth.
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Here are the key takeaways:
- Repo rate reduced by 75 basis points to 4.4.%. Reverse repo-rate reduced by 90 basis points to 4%.
- The Cash Reserve Ratio has been reduced to 3% of the Net Demand and Time Liabilities with effect from March 28.
- RBI governor said that the outlook remains extremely uncertain at the time and going forward will depend on how India battles the COVID-19 pandemic.
- Expectations of a shallow recovery in 2020 from 2019’s decade low in global growth have been dashed.
- RBI’s fresh announcements will further provide relief to several Indians who have been forced to sit home in the wake of the novel coronavirus outbreak.
- There is a rising probability that large parts of the world will slip into recession.
- COVID-19 stocks the global economy and the outlook is highly uncertain & negative. Several nations are battling its exponential contagion. Countries are shutting down to prevent being sucked into a kind of black hole.
- India has locked down economic activity and financial markets are under severe stress. Finance is the lifeline of the economy, keeping it flowing is the paramount objective of RBI at this point of time.
- The Indian banking system is safe and sound. In recent past COVID-19 related volatility in the stock market has impacted share prices of banks as well resulting in some panic withdrawal of deposits from a few private sector banks.
- Depositors of commercial banks including private sector banks need not worry about the safety of their funds.