Business

Reserve Bank cuts repo rate to 3.75%

Share
No payment of EMI till Aug 31, GDP to remain negative for 2020: RBI Governor

"All this (the rate cut) was expected and will provide support especially so as the lockdown has been quite severe for the last two months or so impacting activity", analysts at CARE Ratings said, hinting that the markets reacted negatively to the move because of the negative growth statement from Das.

The SARB now expects GDP in 2020 to contract by 7.0%, compared to the 6.1% contraction forecast in April. "I think a one time restructuring would have enabled a more certain recovery", its partner Abizer Diwanji said.

Das said that the RBI is ready to use all its instruments to address the concerns of the unknown future. Today's trials will be traumatic but together we will triumph, says Das.

On March 20 the SARB also announced liquidity measures which included allowing banks access to cheaper funding, increasing the number of repo auctions, and reducing the upper and lower limits of the standing facility borrowing rate, in addition to a secondary market bond-buying programme.

With the lockdown being extended till May 31, the Reserve Bank of India has extended the moratorium of installments of term loans by another three months till August 31, 2020. This makes it a six month moratorium.

The lockdown, imposed March 25 and scheduled to run through May 31, is color coded - red, green and orange - based on contagion risk.

The central bank refrained from giving a projection for GDP growth for the current financial year, as it stopped at saying GDP growth expected in the "negative territory" with some pick-up in growth impulses from the second half of 2020-21 onwards. The situation is no different for emerging market economies, the Governor said. He added that an improvement in passing on a lower rate to borrowers has been noticed across various business segments.

Governor Shaktikanta Das announced a repo rate cut of 40 basis points to 4%.

There will be gradual revival of activity and demand by the second half of FY21, said RBI governor. He said that the price of vegetables, oilseeds, and milk emerged as pressure points.

Lesetja Kganyago, Governor of the South African Reserve Bank, said the decision to cut South Africa's basic interest rate resulted from the sharp economic contraction facing the country. There was a glimmer of hope, however, in a bumper winter crop of wheat and forecasts for a normal monsoon season in June-September, he said.

"India is seeing a collapse of demand".

However, "getting back to pre-pandemic activity levels will take time", added Kganyago. He said that the world trade is likely to shrink by 13 to 32 per cent in the first quarter.

The Union Cabinet headed by Prime Minister Narendra Modi on Wednesday approved additional funding of up to Rs 3 lakh crore at a concessional rate of 9.25 per cent through the Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector hit hard by the coronavirus crisis.

Share