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RBI reduces repo rate by 40 bps from 4.4% to 4%: Key points of Shaktikanta Das’s speech – Times of India

NEW DELHI: Reserve Bank of India (RBI) governor Shaktikanta Das on Friday addressed the media as the government extended the nationwide lockdown to curb the spread of the deadly coronavirus. This is the third briefing by the RBI governor in context of coronavirus related measures in the last two months.
Here are the key points from RBI governor’s address:
* RBI extends moratorium on term loans for a further period of 3 months till August 31.
* In view of the extension of the lockdown and continuing disruption on account of COVID-19, three-month moratorium allowed on term loans and working capitals are being further extended by another 3 months from June 1 to August 31.
* RBI reduces repo rate by 40 basis points from 4.4% to 4%, reverse repo to 3.35%; maintains accomodative stance.
* Inflation outlook has become complicated by the release of partial and incomplete data by the National Statistics Organisation (NSO).
* The MPC assessed that inflation outlook is highly uncertain.
* By Q3 and Q4 it is expected that headline inflation will fall below the RBI’s limit of 4%.
* The GDP growth in 2020-21 is expected to remain in the negative category with some pick up in second half.
* The credit facility for Sidbi has been rolled over for the next 90 days.
* RBI will extend Rs 15,000 crore line of credit to EXIM Bank.
* RBI increases export credit period to 15 months from 1 year.
* Measures announced today can be divided into 4 categories: to improve functioning of markets, to support exports and imports, to ease financial stress by giving relief on debt servicing and better access to working capital and to ease financial constraints faced by state governments.
* Rules governing withdrawal from Consolidated Sinking Fund (CSF) have been relaxed while at the same time, ensuring depletion of fund balance is done prudently. This will enable states to meet about 45% of redemption of their market borrowings which are due in 2020-21.
* The Group Exposure Limit of banks is being increased from 25% to 30% of eligible capital base for enabling the corporates to meet their funding requirements from banks. The increased limit will be applicable up to June 30, 2021.
* Industrial production shrank by close to 17% in March with manufacturing activity down by 21%. Output of core industries contracted by 6.5%.
* India’s foreign exchange reserves have increased by 9.2 billion during 2020-21 from 1st April onwards. So far, up to 15th May, foreign exchange reserves stand at 487 billion US dollars.
* Private consumption has seen biggest blow due to COVID-19 outbreak, investment demand has halted.
* India is witnessing collapse of demand; electricity, dip in petroleum product consumption.
* Government revenues have been impacted severely due to slowdown in economic activity amid COVID-19 outbreak
* Covid 19 has crippled the global economy and activities across the world have stalled.
* Recent macroeconomic data revealed the damage done by Covid-19 to the economy and brought forward the need for an off cycle meet of the monetary policy committee(MPC) in lieu of the earlier scheduled meeting between June 3 to June 5.
* The RBI has been constantly monitoring the situation and in the past 2-3 months we have been taken policy measures. We are trying to anticipate and be proactive in announcing reforms.
* The central bank will be vigilant in battle readiness to address dynamics of unknown future; will preserve financial stability.