RBI policy decisions: Repo rate untouched, gold loan increased to 90% of the value

RBI makes policy changes to manage current fragile macroeconomic and financial conditions

RBI policy decisions: Repo rate untouched, gold loan increased to 90% of the value

Reserve Bank of India (RBI) Governor Shaktikanta Das touched upon a few key policy decisions during his virtual bi-monthly monetary policy address on Thursday, August 06, 2020.

Following a three-day meeting, the six-member Monetary Policy Committee (MPC) headed by Mr Das decided unanimously to leave the repo rate untouched at 4% and the reverse repo rate at 3.35%. The MPC continues to maintain its ‘accommodative’ stance and ruled out any further increase in the repo rate for the foreseeable future. The committee expects inflation to remain slightly elevated during the July-September quarter and ease out during the latter half of the financial year on account of ‘favourable base effect’.

Here are some of the other highlights from the policy review:

Higher margins on loans against gold

The permissible loan-to-value ratio (LTV) for gold jewellery has been increased to 90% from the existing 75%. This will allow households to increase borrowing to mitigate the impact of Covid-19.

Related: 6 Situations in which a gold loan can come in handy 

Debt restructuring for MSMEs

MSME borrowers with stressed loans will be eligible for debt restructuring as long as their accounts were classified as "standard" on March 1, 2020. To take advantage of the relief, the restructuring will have to be implemented by March 31, 2021.

Rs 10,000 crore relief facility for housing and NBFC sectors

An additional special facility of Rs 10,000 crore will be made available to housing and non-banking financial sector to address the liquidity concerns on account of COVID-19-related disruptions. This includes a Rs 5,000-crore facility earmarked for National Bank for Agriculture and Rural Development (NABARD).

Related: All about the housing and export-related measures announced by the Finance Minister 

Additional measures to manage macroeconomic and financial conditions

The RBI will extend priority lending status to startups, provide liquidity support for financial markets and improve credit flow. With digital payments scaling up, the MPC aims to leverage technology and encourage innovations across the financial sector so as to further deepen digital payment systems. Look at these initiatives taken by the Indian government to boost startups in India.

Related Article