Prime Minister Narendra Modi on Friday praised the Reserve Bank of India (RBI) for slashing interest rates and announcing several measures to inject ₹3.74 lakh crore liquidity into the system. “Today the RBI has taken giant steps to safeguard our economy from the impact of the coronavirus. The announcements will improve liquidity, reduce cost of funds, help the middle class and businesses,” the prime minister tweeted on Friday soon after RBI Governor Shaktikanta Das concluded his press conference.
Today @RBI has taken giant steps to safeguard our economy from the impact of the Coronavirus. The announcements will improve liquidity, reduce cost of funds, help middle class and businesses. https://t.co/pgYOUBQtNl
— Narendra Modi (@narendramodi) March 27, 2020
A day after Finance Minister Nirmala Sitharaman unveiled a Rs 1.7 lakh crore package to combat the impact of the 21-day coronavirus lockdown, Das on Friday cut lending rates by 75 basis points to 4.4 per cent.
The RBI said it was maintaining its "accommodative" stance, and would maintain its position "as long as necessary" to revive growth, while ensuring inflation remained within target.
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 remains 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 a 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 per cent from 90 per cent.
The RBI has injected Rs 2.80 lakh crore liquidity through various instruments since the last monetary policy meet in February, the governor added.
The central bank 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.
