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    Home / News / Business News / As economy suffers, RBI keeps repo rate unchanged
    Business

    As economy suffers, RBI keeps repo rate unchanged

    As economy suffers, RBI keeps repo rate unchanged
    Written by Shalini Ojha
    Aug 07, 2020, 01:21 am 3 min read
    As economy suffers, RBI keeps repo rate unchanged

    On Thursday, RBI Governor Shaktikanta Das announced that repo rate and reverse repo rate will not change, a move which would keep retail prices contained. He noted that economic activities picked up pace but fresh lockdowns, imposed after coronavirus infections surged, had an adverse impact. As per Das, real GDP growth will remain in negative zone in "both the first half and the entire financial year 2020-21".

    In May's presser, Das said RBI has extended loan moratorium

    Das was addressing media to inform about the decisions taken by the Monetary Policy Committee (MPC). The last time he held a press meet was in May, to speak on the growing concerns about the economy, which suffered immensely due to coronavirus. Back then, RBI decided to extend the loan moratorium for another three months till August.

    Repo rate remained unchanged at 4%

    To note, the repo rate is the rate at which the apex bank lends money to commercial banks whenever a shortage of funds arises. The repo rate is also used to control inflation in the country — the RBI increases the rate to lower inflation. As per Das' latest announcement, the repo rate stands at 4% and reverse repo rate at 3.35%.

    Loans against gold enhanced to 90% of value: Das

    Further, Das said loans against gold have been enhanced to 90% of the value, up from the current 75% to help households deal with the impact of COVID-19. He also said that stressed MSME borrowers will be eligible for debt restructuring if their accounts have been classified as standard. "The loans to start-ups will get the priority sector lending tag," Das added.

    Soundness of banking system on RBI's mind

    "It has been decided to provide a window under the June 7, 2019 framework of RBI to enable lenders to implement resolution plan without a change in ownership and in respect of personal loans, while classifying them as standard assets subject to certain conditions," he said.

    RBI sees inflation at elevated levels till September

    Additionally, Das informed that MPC anticipated inflation to remain at elevated levels between July and September. It could ease in the second half of the current financial year. He added that manufacturing firms expect demand to recover from September. Saying that the war against COVID-19 is "most intense at the current juncture," he said the "regulatory response has to be dynamic, pro-active and balanced."

    RBI will take accommodative stance till necessary: Das

    He also announced that NABARD and National Housing Bank (NHB) will provide additional liquidity of Rs. 10,000 crore. Das assured that RBI will take an accommodative stance for as long as it is necessary. "RBI is perhaps the only central bank in the world which has set up a special quarantine facility for continuity of critical operations," he added.

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