Rbipredict­sec­on­omy toshrink,cuts keyrate

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

Hindustan Times (Delhi) - - Front Page - HT Cor­re­spon­dent let­ters@hin­dus­tan­times.com

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



May 22

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