Coronavirus: RBI slashes repo rate by 75bps to 4.4%

The RBI cuts
repo rate by 75 basis points from 5.15%to 4.4 %on Friday. The RBI monetary
policy committtee, scheduled to meet by the end of the month, deferred the
meeting to March 25, 26 and 27 in view of the coronavirus outbreak.

The rate cut
was voted by 4:2 majority in the six-member MPC meeting. The RBI will continue
its accomodative stance as long as the economy is brought back to
normalcy. 

The reverse
repo rate, too, has been slashed 90 bps to 4 per cent. “The fundamentals
of the economy are much stronger than 2008. RBI remain optimistic about faster
recovery once COVID-19 is contained,” said RBI Governor Shaktikanta Das.

The RBI has
also requested the banks to enhance lending activities. At the same time, all
commercial banks and NBFCs have been permitted to allow three-month moratorium
on payment of installments in respect of all terms loans outstanding on March
1, 2020.

Further, the
global fall in oil prices may help India. “Food and fuel prices will
provide relief with lower inflationary pressures,” said Das. The central
bank has also cut the CRR by 100 basis points to 3 per cent. “Despite
ample liquidity in the system, the transmission is slow, hence CRR is cut by
100 basis points to 3 per cent. “This will release primary liquidity of Rs
1.37 lakh crore,” Das said. The minimum daily CRR balance requirement has
also been reduced to 80% from 90%.

RBI has
injected Rs 2.80 lakh crore liquidity through various instruments since last
monetary policy meet in February, the governor added.

RBI also
announced a comprehensive package, including measures to expand liquidity,
steps to reinforce monetary transmission, efforts to ease financial stress by
relaxing repayment and endeavour to improve the functioning of the market.

Furthermore,
the RBI hinted that India’s growth estimates for the fourth quarter of the
current financial year might be at risk.