The RBI slashed the benchmark lending rate by 40 basis points to mitigate the impact of the COVID-19 crisis and the reverse repo rate has been cut to 3.35 percent.
India’s foreign exchange reserves have increased by $9.2 billion during 2020-21 from April 1 onwards.
The RBI has extended loan moratorium until August 31, which makes it a six-month moratorium.
India’s GDP growth is estimated to be in negative territory in FY21, said the RBI Governor.
Along with the reduction in policy rates, the RBI announced several measures:
- This comes on top of the INR 9.42trn of liquidity provisioning since the February MPC Among the steps announced today, the following measures stand out: Steps announced by RBI to improve rate cut transmission, and provide regulatory support to banks, corporates and trade entities
- RBI has allowed banks to extend the debt moratorium by another 3 months, and has given relaxations to banks to increase group exposure limits for corporates (from 25% to 30%), along with permission to convert interest costs accumulated during the moratorium into an extended loan to be repaid within the financial year, along with other steps to augment working capital availability.
- To support exports/imports, RBI has increased pre- and post-shipment credit facility, along with a INR 150bn credit line extension to EXIM Bank.
- To support capital flows, RBI noted that FPIs under the Voluntary Retention scheme can take an extra three months to meet their investment commitments.
- For state financing, RBI has allowed measures to relax access for states to the consolidated fund, which should help in relieving stress in state financing.