RBI Repo Rate News: Reserve Bank of India (RBI) Governor Shaktikanta Das, announced that the Central Bank has decided to reduce the repo rate by 40 basis points from 4.4 percent to 4 percent. Shaktikanta Das said the RBI has also decided to reduce the reverse repo rate to 3.35 percent.

RBI Governor announces a 40 bps cut in repo & reverse repo rates

  • RBI cuts repo rate, slashes reverse repo rate, EMI moratorium extended.
  • As announced by the RBI governor Repo rate cut by 40 basis points from 4.40 percent to 4.00 percent with immediate effect.
  • The RBI also allowed lenders to extend an ongoing moratorium on loan repayment, which was due to end on May 31, by another three months to August 31.

On 22nd May, Governor of RBI Shaktikanta Das announced in a press conference about cut in ‘Repo rate’ by 0.4 percent, resulted in repo rate is now standing at 4 percent.

What is Repo rate?

Repo rate, the rate at which RBI provides loans to the banks. Repo Rate in India is the primary tool in the RBI’s Monetary and Credit Policy. 

It is the time when all economic activities are sluggish and due to coronavirus pandemic India is in the economic depression. On Friday RBI decided to reduce the repo rate, (the rate at which RBI provides the loan to the banks) by 40 basis points to 4 percent, and Reverse repo rate by 40 basis points to 3.35 percent.

How does moratorium period helps the payment?

When the borrower is not required to make any repayment. It is a waiting period before which repayment by way of EMIs begins.

  • Extension of moratorium

■ RBI Repo Rate News: RBI announced the extension of moratorium and loan repayments are again extended to another 3 months to 31st August 2020. The extension of a three-month moratorium on repayment of term loans by a borrower means that they would not have to pay the loan EMI installments during the moratorium period.

The earlier three-month moratorium on the loan EMIs was ending on May 31, 2020. This makes it a total of six months moratorium on loan EMIs starting from March 1, 2020.

  • Extension will provide relief

The extension will provide relief to many individuals, especially the self-employed, as they would have found it difficult to service their loans such as car loans, home loans, etc. due to loss of income during the lockdown period effective from March 25, 2020.

“India seeing the collapse of demand for electricity and petroleum consumption which are the basic necessities and due to pandemic, Industrial production shrunk by 17 percent in March. This statement gives us an idea of the requirements of RBI to take some measures, what they did yesterday.

Shaktikanta das,

SIGNIFICANCE OF PROCLAIMATION

The cut of 40 bps is going to reduce the charges for the funds given to banks by RBI and this will reduce the lending rates along with it’s EMI ( Equated monthly Installments ) on home, auto and personal loan rates are also expected to come down with this proclamation.

Read in Hindi: भारतीय रिज़र्व बैंक की नई घोषणाएं

RBI Repo Rate News: Extension of the moratorium is a great respite to the corporates because this is the time when there are very less or no economic activities are prevailing. Extension of the moratorium will let the corporates to restart their units again and become stable.

MUTUAL DECISION

“MPC voted with 5:1 majority to reduce the policy repo rate by 40 basis points consequently the NSF and Bank rate now stand reduced to 4.25 percent and reverse repo rate by 3.35 percent”.

RBI Governor Shaktikanta

Shivraj Singh Chouhan, Chief Minister of Madhya Pradesh (twitted)

The measures announced by @RBI to cut repo rates by 40 bps and extend moratorium by 3 months will provide a boost to credit creation in the economy and relief to borrowers who are facing cash flow problems due to lockdown. It will lead to stabilisation of the financial system.

Shivraj Singh Chouhan, Chief Minister of Madhya Pradesh

More to know

  • Line of credit extended to 15000 crores to EXIM BANK for 90 days. In order to enable the EXIM BANK to meet its foreign currency resource requirements.
  • The maximum permissible period of post-shipment export credit sanctioned by the bank is decided to increase from the existing one year to 15 months for disbursements made up to July 31, 2020.
  • The reverse repo rate stands reduced to 3.35% from 3.75%. The RBI has cut the repo rate by a total of 115 bps since the lockdown began in late March. It also marks the eighth straight rate cut by the RBI.