RBI slashes repo rate by 40 bps, extends loan moratorium by 3 months

RBI governor Shaktikanta Das says GDP growth in 2020-21 is likely to remain in the negative category even though it may improve in the second half of the fiscal

This is the RBI governor’s third such address since the lockdown was imposed in view of the COVID-19 situation in the country. Photo: Twitter/ANI

RBI governor Shaktikanta Das on Friday (May 22) announced that repo rate will be slashed by 40 basis points (bps) to 4 per cent, and extended the moratorium on all term loans by another three months.

The RBI also reduced the reverse repo rate to 3.35 per cent.

While addressing a press conference on Friday, Das said GDP growth in 2020-21 is likely to remain in the negative category even though it may improve in the second half of the fiscal.

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This is the RBI governor’s third such address since the lockdown was imposed in view of the COVID-19 situation in the country.

On March 27, Das had announced a cut down in repo rate by as much as 75 bps to boost growth. He had also announced a three-month moratorium for banks to provide relief to borrowers whose income has been affected by the COVID-19 lockdown. With the additional extension of three months now, the loan moratorium’s deadline stands at August 31.

Related news: ₹20 lakh crore stimulus package: Here’s the break-up

In April, the bank cut its reverse repo rate to 3.75 per cent.

The RBI governor also said on Friday that its rules governing withdrawal from Consolidated Sinking Fund (CSF) will be relaxed while ensuring that depletion of fund balance is done prudently. “It will enable states to meet about 45 per cent of redemption of their market borrowings which are due in 2020-21,” he said.

The central bank also increased the Group Exposure Limit of banks from 25 per cent to 30 per cent of eligible capital base to enable corporates to meet their funding requirements from banks. The increased limit will be applicable up to June 30, 2021.

The RBI governor’s presser comes days after Finance Minister Nirmala Sitharaman, in a series of addresses explained the five tranches of the Centre’s ₹20 lakh crore stimulus package to help the economy get back on its feet.

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