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RBI cuts repo rate by 40 bps to 4%, maintains accomodative stance

Friday,   22-May-2020   10:16 AM (IST)

The RBI Governor Shaktikanta Das on Friday announced a 40 basis points surprise repo rate cut and maintained its accomodative stanc . The repo rate now stands at 4 per cent from 4.4 per cent earlier. Five of six MPC members voted in favour of the rate cut, Das said. Das said MPC members met for three days in the off cycle meeting of MPC members that was otherwise scheduled for June 3-5. Das said the Indian economy is witnessing a collapse of demand as suggested by electricity, petroleum products and private consumption data. "Private consumption has taken biggest blow due to Covid-19 outbreak. Investment demand has halted," he said. Due to the slowdown, the government revenues have also been impacted severely, Das said. Das said a combination of monetary, fiscal and administrative measures being undertaken by RBI and the government would create conditions for a revival of economic activity in the second half of FY21. "But the downside risks to this assessment are significant and contingent upon the containment of the pandemic and quick phasing out of social distancing and lockdowns," he said. Overer all, the GDP growth for FY21 is seen to be in the negative territory, Das said. Headline inflation, he said, may stay firm in the first half of the financial year. It is expected to ease below 4 per cent in the third and fourth quarters of FY21, he said. Meanwhile, the RBI announced roll over of Rs 15,000-crore refinance facility for SIDBI for 90 days. The export credit period has been increased to 15 months from 1 year. The central bank also extended moratorium on loan repayments by three more months. Banks so far are offering moratorium to retail customers on a blanket ‘opt-out’ basis and to wholesale customers on case-to-case ‘opt-in’ basis.