The Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said that the Monetary Policy Committee (MPC) has unanimously decided to slash the repo rate by another 40 basis points from 4.4 percent to 4 percent.
The press briefing took place days after Finance Minister Nirmala Sitharaman gave details of the Rs 20 lakh crore economic package to help recover the economy from the coronavirus pandemic.
He also said that the Industrial production shrank by close to 17 percent in March with manufacturing activity down by 21 percent. The output of core industries contracted by 6.5 percent.” “Amidst this encircling gloom agriculture and allied activities have, however, provided a beacon of hope on the back of an increase of 3.7 percent in food grain production to a new record,” he added.
Sjhaktikanta Das also said that “India’s foreign exchange reserves have increased by 9.2 billion during 2020-21 from April 1 onwards. So far, up to May 15, foreign exchange reserves stand at 487 billion US dollars.” Meanwhile, the RBI Governor said that the GDP growth in 2020-21 is expected to remain in the negative category with some pick up in the second half.
Measures announced today can be divided into 4 categories:
- to improve the functioning of markets
- to support exports and imports
- to ease financial stress by giving relief on debt servicing and better access to working capital
- to ease the financial constraints faced by state governments
RBI Governor also said that “Three-month moratorium we allowed on term loans and working capitals, we allowed certain relaxations. In view of the extension of the lockdown and continuing disruption on account of coronavirus, these measures are being further extended by another 3 months from June 1 to Aug 31.”
Meanwhile, the Group Exposure Limit of banks is being increased from 25 percent to 30 percent of eligible capital base for enabling the corporates to meet their funding requirements from banks. The increased limit will be applicable up to June 30, 2021.
It has also been decided to relax rules governing withdrawal from Consolidated Sinking Fund (CSF) while at the same time, ensuring depletion of the fund balance is done prudently. It will enable states to meet about 45 percent of redemption of their market borrowings which are due in 2020-21.