Rbipredictseconomy toshrink,cuts keyrate

RELIEF PLAN Repo rate slashed to 4%, loan moratorium extended by 3 months

nMUMBAI/NEWDELHI: The Monetary Policy Committee of the Reserve Bank of India (RBI) cut the policy rate by 40 basis points to 4.0% on Friday, acknowledging the adverse impact on the Indian economy of the coronavirus disease (Covid-19) and the lockdown imposed to combat its spread.

A basis point is one-hundredth of a percentage point. RBI has so far cut its policy rate by 115 basis points since the crisis began to a historic low.

RBI governor Shaktikanta Das also extended the moratorium on payment of term loans (this includes mortgages or housing loans taken out by individuals, even personal loans) by another three months to August 31.

The moves are expected to make loans cheaper, and give borrowers a break from monthly loan repayments at a time when they are financially stressed. The interest for these six months will be treated as a loan that will have to be paid by the end of this financial year (March 31).

Interestingly, Das admitted that growth will be in “negative territory” this year, the first time anyone in the government or the central bank has admitted that India’s gross domestic product (GDP) will shrink this year.

Chief economic advisor Krish

4.4% 4.0% Reverse repo rate

The rate at which RBI borrows from banks -reduced from to

Will make loans cheaper and give borrowers a break from monthly loan repayment

Will help spur imports and exports that were down by 58% and 60% in April

"The macroeconomic impact of the pandemic is turning out to be more severe than initially anticipated... GDP growth in 2020-21 is estimated to remain in negative territory, with some pick-up in growth impulses from second half of 2020-21." SHAKTIKANTA DAS, RBI governor

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May 22