The repo rate was reduced by 75 basis points, from 5.15% to 4.4%.
RBI on COVID-19
Reserve Bank of India (RBI) Governor Shaktikanta Das addressed the media on March 27, 2020 on the impact of COVID-19 on the Indian economy and announced some measures to deal with the crisis.
The RBI Governor noted that the current economic outlook is highly dependent on the duration, intensity and spread of the coronavirus. He said there is a strong possibility that large parts of the world will slide into recession.
Additionally, Das said a weak recovery is expected in 2020 after a decade of weak global growth in 2019. The Monetary Policy Committee reported that global economic activity has come to a near standstill due to the various lockdowns imposed to fight against COVID-19. spread and implement social distancing.
RBI Governor’s Media Address: Highlights
- The repo rate was reduced by 75 basis points, from 5.15% to 4.4%.
- The repo rate was reduced by 90 basis points to 4% to encourage banks to lend.
- CRR: Cash reserve ratio for all banks reduced by 100 basis points to 3% of net demand and forward liabilities with effect for one year from March 28. The CRR has been reduced to release liquidity.
- Moratorium on term loans: All credit institutions benefited from a 3-month moratorium.
- Demand: Aggregate demand could weaken.
- GDP growth: GDP growth in the last quarter of FY2019-20 and FY20-21 is likely to be affected.
- Liquidity: 3.74 lakh crore of cash injected
Global Economic Outlook
The RBI Governor noted that the global economic outlook is highly uncertain and negative as many countries struggle to contain the virus. Several nations have imposed lockdowns to deal with the crisis.
Indian banking system
The RBI Governor assured that the Indian banking system is safe and sound and depositors in private and commercial banks need not worry about the security of their deposits. He said COVID-19-related volatility had recently impacted bank stock prices, leading to a panicked withdrawal of deposits from a few private sector banks. However, this time there is no need to worry and indulge in such withdrawals.
RBI Governor’s speech comes just a day after Union Finance Minister Nirmala Sitharaman unveiled the new economic package to tackle the impact of the coronavirus on the economy and provide relief to the poor and the most vulnerable. The measures worth around Rs 1.70 lakh crore are expected to reduce the impact of the outbreak on the economy and on people.
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