In a huge development to reduce the impact on the Indian economy due to the outbreak of coronavirus, the RBI on Friday reduced the interest rate by 0.75%, the highest single rate cut under Governor Shaktikanta Das. The Indian federal bank also announced a moratorium on EMI payments for three months.
Reacting to the steps taken by the RBI, Prime Minister Narendra Modi tweeted, “Today @RBI has taken giant steps to safeguard our economy from the impact of the Coronavirus. The announcements will improve liquidity, reduce cost of funds, help middle class and businesses.
Today @RBI has taken giant steps to safeguard our economy from the impact of the Coronavirus. The announcements will improve liquidity, reduce cost of funds, help middle class and businesses. https://t.co/pgYOUBQtNl
— Narendra Modi (@narendramodi) March 27, 2020
The RBI’s monetary policy was scheduled to meet in on 31 March and 3 April but decided to hold an emergency meeting on Friday to respond to the challenges posing the Indian economy amidst coronavirus pandemic. The RBI said, “After extensive discussions, the MPC voted unanimously for a sizeable reduction in the policy repo rate and for maintaining the accommodative stance of monetary policy as long as necessary to revive growth, mitigate the impact of COVID-19, while ensuring that inflation remains within the target.”
Four out six members voted in favour of reducing the interest rate, while two others voted against the move.
The RBI also said that ‘all commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) (“lending institutions”) are being permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020.’
This comes just a day after Finance Minister Nirmala Sitharaman announced a relief package worth Rs 1.7 crore for people suffering during the countrywide lockdown period.
