Future policies need to be tailored to support economy in pandemic: RBI

Future economic policies need to be tailo red towards supporting the economy, depending on how effects of pandemic play out, RB I executive director M Rajeshwar Rao said on Friday.

He said the first set o f responses from the Reser ve Bank of India was to ensure that the markets continue to function and ensure solvency in the financia l sector.

Several measures, includ ing reduction in Cash Reser ve Ratio, special finance facility, Long Term Repo Operations (LTRO) and Targeted Long Term Repo Operations (TLTRO) were announced, he said at a webin ar organised by Assocham.

As a result of various measures, he said, the RBI injected arou nd Rs 6.5 lakh crore liquidity in the banking system during the pandemic.

He said, "We need to see how the impact is go ing to be there on the economic activities of the various players, and once we get a fix on this issue perh aps the policy responses could be appropriately tailored. We have to see how the situation evolves an d based on evolving situatio n the policies could be suitably m odified to address co ncerns".

Emphasising that the world and India will not re main in the grip of COVID-19 forever, he said , "not in a distinct future this pandemic will end through combinatio n treatment, vaccination and ach ievement of herd immunity. Further, future economic policies need to be tailored towards supp orting the economy as and when t he effects of pandemic play".

Rao said once the immediate priority of ad dressing the health issues is sort ed out, the second step could be to ensure su stainability of existing businesses.

"We need to approach stage-by - stage, so the first priority at this juncture is going to be the health and protection of the peo ple, once we get a certain degree of comfort on that aspect, the second segment will come into play , " he said.

With the policy inter ventions, he said, the interest rate on commercial and government borrowing have hit lowest in the decade.

RBI's benchmark policy rate or repo rate has been brought down to 4%, the lowest ever.

"The policy repo rates which were lowered by 135 bps between February and December 2019 were further reduced by another 115 bps since March 2020 taking the cumulative r ate cuts to abo ut 250 bps and at four%, the policy rate is at one of its lowest ever levels," Rao said.