From repo rate cut to extended moratorium; here are the highlights of RBI governor’s conference

In his third address since the nationwide coronavirus lockdown, Reserve Bank of India (RBI) Governor Shaktikanta Das today announced a cut in the repo rate by 40 basis points to 4% and also extended the moratorium on all term loans by another 3 months.

The RBI cut interest rates by 75 basis points in late March. Markets and economists are now expecting at least another 75-100 basis points cuts in the remainder of this fiscal year.

Here are the highlights of the press conference:

  • Repo rate slashed by 40 basis points from 4.4 % to 4%. Reverse repo rate reduced to 3.35%.
  • MPC, which met off-cycle, voted in the ratio of 5:1 in favour of the repo rate cut
  • Inflation to remain firm in the first half of 2020 but ease later on
  • Country’s GDP growth expected to remain in negative
  • Govt revenues have been impacted severely due to slowdown in economic activity amid COVID-19 outbreak
  • India seeing a collapse of demand; electricity, dip in petroleum product consumption; fall in private consumption
  • India’s foreign exchange reserves have increased by 9.2 billion during 2020-21 from April 1 onwards. So far, up to May 15, foreign exchange reserves stand at 487 billion USD.
  • Government 10-year bond yields slumped 15 basis points after the repo rate cut.
  • Lending institutions to extend the moratorium on term loans by another three months till August 31.
  • RBI to extend ₹15,000 crore line of credit to EXIM Bank
  • RBI has increased export credit period to 15 months from 1 year.
  • The group exposure limit for lenders to corporates raised to 30% from 25%
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