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Coronavirus impact: RBI unexpectedly slashes repo rate by 40 bps, moratorium on loans extended to Aug 31

ANI, Reuters
Filed on May 22, 2020
RBI, Coronavirus, repo rate, Inida

As a result, the reverse repo rate stands at 3.35 per cent.

The Reserve Bank of India (RBI) on Friday reduced repo rate by 40 basis points to 4 per cent in an effort to further boost liquidity in the economy which has been reeling under the impact of Covid-19 induced countrywide lockdown.


As a result, the reverse repo rate stands at 3.35 per cent, said RBI Governor Shaktikanta Das. The six-member monetary policy committee (MPC) voted 5:1 in favour of the decision.

Repo rate is the rate at which a country's central bank lends money to commercial banks, and the reverse repo rate is the rate at which it borrows from them.

Besides, the Apex bank took other major decisions keeping in mind the devastating economic impact of Covid-19 pandemic. In one such decision, the Reserve Bank extended the moratorium on interest payments on all term loans for another three months.

It also allowed for repayment of accumulated interest on account of the moratorium through FY21.

Furthermore, Governor Das noted that pandemic has had a crushing blow to the demand.

"High frequency indicators points to collapse in demand in March, the Governor said.

Das observed that investment demand has virtually been halted. He, however, said that agriculture.

He added the MPC will maintain accommodative stance, therefore, leaving further for more policy action.


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