Key Highlights from RBI Governor press conference on 22 May 2020

RBI reduces repo rate from 4.4% from 4%; announces extension on loan moratorium for another three months till August 31, 2020

Key Highlights from RBI Governor press conference on 22 May 2020

Just a few days after the government enunciated on the Rs 20 lakh crore stimulus package, the RBI Governor Mr Shaktikanta Das addressed the country for the third time presenting a host of additional measures aimed at easing the liquidity condition and extending relief to borrowers.

After an out-of-cycle review meeting with the Monetary Policy Committee (MPC), here are some of the key takeaways from Mr Das’ address:

Liquidity support

The MPC voted in favour of an additional 40 basis points repo rate cut. This brings the key monetary policy rate down to 4% from 4.4% and takes the reverse-repo rate to 3.35%. A reduction in the repo rate will enhance credit availability for both industrial establishments and individual borrowers and manage inflation.

Related: FM announces Rs 20 trillion economic stimulus package in a bid to build a self-reliant India

Extension on loan moratorium

The loan moratorium announced by the RBI on March 27, 2020, allowing all commercial banks, co-operative banks and NBFCs to allow deferment of payments till May 31, 2020 has now been further extended by another three months, i.e., from June 1, 2020 to August 31, 2020.

As previously specified by the RBI, such deferment will not lead to changes in the terms and conditions of the loan agreement, and will not result in any asset classification downgrade. Additionally, opting for the deferment will neither incur penal charges nor impact the borrower’s credit score.

Related: COVID-19: RBI governor press conference highlights you should know about

Refinancing schemes 

The special Rs 15,000 crore refinancing facility offered to SIDBI at repo rate for business lending and refinance operations has been rolled over for another 90 days. Similarly, Rs 15,000 crore credit line has been offered to EXIM banks for US dollar swap facility, with a rollover of up to one year.

States can deploy more funds

The RBI has also eased out the rules regarding withdrawal of funds from the States Consolidated Sinking Fund. This will make an additional Rs 13,300 crore available to the State Governments to fight the pandemic. The RBI has also increased the number of days a State can remain in an overdraft within a quarter from 32 to 50 days.

The monetary intervention in conjunction with the government’s fiscal measures will hopefully cushion the economy from the ongoing Coronavirus impact. If you are looking for some tips on how to prepare yourself financially during a pandemic, this piece is for you