Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced a cut in the repo rate to 4 per cent from the existing 4.4 per cent in a surprise move, and extended a loan moratorium to banks by another three months in view of the coronavirus pandemic and the weeks-long lockdown. In his first address to the media after the government unveiled a fiscal and monetary stimulus worth Rs 20.97 lakh crore to support the economy, the RBI Governor said the central bank expects GDP or gross domestic product to shrink in the current financial year. (Read Shaktikanta Das's full statement)
Here are the five big announcements made by RBI Governor Shaktikanta Das:
Cut in repo rate, reverse repo rate by 40 basis points each
The central bank's Monetary Policy Committee decided to cut the repo rate - the key interest rate at which the RBI lends funds to commercial banks - to 4 per cent from the existing 4.4 per cent. That marked the lowest repo rate since the year 2,000. It also lowered the reverse repo rate - the interest rate at which the RBI borrows funds from commercial banks - to 3.35 per cent from existing 3.75 per cent.
Extended three-month moratorium from June 1 to August 31
Reserve Bank of India extended the moratorium on payment of loans by another three months till August to provide much-needed relief to borrowers whose income has been hit due to the coronavirus crisis. In March, the central bank had allowed a three-month moratorium on payment of all term loans due between March 1, 2020 and May 31, 2020.
GDP expected to contract in 2020-21
The RBI expects the country's gross domestic product (GDP) to shrink in the current financial year. RBI Governor Shaktikanta Das said: "The outbreak of coronavirus has disrupted economic activities." The RBI chief, however, expressed confidence that economic activity will revive gradually by the second half of the year ending March 31, 2021.
Rs 15,000 crore allocated to EXIM Bank to support trade
The Export-Import Bank of India provides financial assistance to exporters and importers in order to promote the country's trade activities.
RBI offered 90-days extension to SIDBI for the 90-day term loan facilities
The central bank offered 90-days extension to SIDBI for the 90-day term loan facilities in order to provide additional liquidity support to the MSME sector.