RBI has cut repo rate by 75 basis points, bringing it down from 5.15% to 4.4%, Governor Shaktikanta Das told media at a briefing on Friday. The reverse repo rate was reduced by 90 basis points to 4%.
This announcement came a day after Finance Minister Nirmala Sitharaman announced an economic package of Rs. 1.7 lakh crore to mitigate coronavirus impact.
Das requested citizens to follow rules to defeat COVID-19
Das said the nation was facing an unusual crisis and urged people to follow guidelines laid down by the government, hoping that the measures will help ward off the problem.
To note, Monetary Policy Committee (MPC) of RBI, defied its schedule and held a meeting in wake of the pandemic.
He said protecting the domestic economy from the pandemic was a top priority.
Do you know?
What is repo rate?
Repo rate is the rate used by the apex bank to lend 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.
Global recession likely, said Das
Das said MPC understands that global economic activity has come to a standstill due to the pandemic. "Expectations of a shallow recovery in 2020 from 2019's decade low in global growth have been dashed," he added.
He said there are high chances that large parts of the globe will slip into recession due to the outbreak, that has killed over 24,000.
Some steps were taken in banking sector too
Some steps have also been taken in the banking sector. Das said lenders can allow a three-month moratorium on internet payments on working capital facilities and on term loans, all lenders can allow three-month moratorium or repayments.
This will not lead to "asset classification downgrade".
"RBI is at work and calibrating action to meet any liquidity mode," he added.
In major move, RBI lets bank have more liquidity
"To help banks in having more liquidity, Cash Reserve Ratio (CRR) of all banks reduced by 100 basis points to 3% for one year. This allows banks to have around $18 billion of liquidity during this crisis," Das announced.
This too shall pass, India's economic fundamentals are strong: Das
Reserve Bank of India Governor: "Despite challenges, I am optimistic. India's economic fundamentals are strong and stable compared to what it was after the global financial crisis of 2008. This too shall pass" #CoronavirusOutbreak