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COVID 19: RBI cuts repo rate. Announces other important steps

A day after Union Finance Minister Nirmala Sitharaman announced an economic relief package, RBI Governor Shaktikanta Das  today announced a repo rate cut by 75 basis points to 4.40 percent to combat the “negative effects of the coronavirus on the economy.”

The reverse repo rate has been reduced by 90 basis points to 4 percent. Repo rate is the key interest rate at which the RBI lends short-term funds to commercial banks.  The cash reserve ratio (CRR) has been cut by 100 bps to 3 percent starting 28 March.
“The outlook is now heavily contingent upon the intensity, spread and duration of the pandemic. There is a rising probability that large parts of the world will slip into recession,” Das said.

Speaking to the media, RBI governor Shaktikanta Das said that the rate cut was warranted due to the severe impact of coronavirus on the Indian economy.

“Worthwhile to remember that tough times never last, only tough people and institutions do,” Das said in his speech. He further went on to say that the RBI has taken a number of steps in the last one month and added that the central bank was at work and in mission mode.

Governor also announced four measures to help the Indian economy – measures to expand the liquidity in the market, steps to reinforce monetary transmission, ease financial stress by relaxing repaying pressures, improve the functioning of markets in view of high volatility experienced.

The RBI also increased accommodation under the marginal standing facility from 2 per cent of SLR to 3 per cent. Das said that all this will inject Rs 3.74 lakh crore to the monetary system.


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