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May 22, 2020

RBI cuts Repo Rate by 40 basis points to 4% : Highlights

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The Monetary Policy Committee of the Reserve Bank of India (RBI) headed by Governor Shaktikanta Das has cut the Repo rate by 40 basis points to 4% from 4.40%.  Repo rate is the rate at which banks borrow from the RBI. RBI last reduced the repo rate by 75 bps on 22nd March 2020 as the lockdown started. The Reverse repo rate is now at 3.35% and the Bank rate stands reduced to 4.25%. The MPC was forced to meet ahead of its 3-5 June scheduled meeting as liquidity continued to be tight in the money market, despite the central banks' previous steps of cutting interest rates and various policy measures. Here are the major highlights of Today's RBI Governor Press Conference.

  • Repo rate cut by 40 basis points
  • Reverse Repo gets adjusted to 3.35 percent.
  • Loan moratorium extended for 3 months
  • Headline inflation could stay firm in first half of 2020, but soften thereafter. If inflation trajectory evolves as expected, space will open up for more rate cuts.
  • India GDP growth in 2020-21 is estimated to remain in negative territory.
  • Regulatory measures to support exports, imports, states.
  • Term loan moratorium extension for another three months till August 31.
  • Accumulated interest for moratorium period can be converted into a term loan. It does not have to be repaid immediately after moratorium ends
  • Group exposure limit for lenders increased to 30 percent from 25 percent
  • Note : 1 bps is one hundredth of a percentage point.

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