RBI Joins Coronavirus Fight with Big-Bang Rate Move

The Reserve Bank of India joined the big fight with a host of measures aimed at minimising the damage from Covid-19. These measures come just hours after Moody's Investors Service cut India's growth forecasts for 2020 calendar year to 2.5% from 5.3%. The MPC decided by 4-2 majority to reduce repo rate by 75 basis points to 4.4 per cent. The reverse repo rate was cut by 90 bps to 4 per cent, creating an asymmetrical corridor. The great EMI relief A moratorium of three months of EMIs on all outstanding loans was announced.The statement says: "All commercial, regional, rural, NBFCs and small finance banks are being permitted to allow 3-month moratorium on payment of instalments in respect of all term loan EMIs outstanding on March 31." For the next three months, no EMI would be deducted from the account of anyone who has a loan outstanding. And all this without any hit on credit score. EMIs will resume after the moratorium period gets over.This is going to be a huge relief for all EMI payers, especially for those — such as the self-employed — whose income had become uncertain in the wake of the lockdown. Three-way liquidity injection — Auction of targeted long term repo operations of 3-year tenor for total amount Rs 1,00,000 crore at floating rate. — Reduction of CRR for all banks by 100 basis points. Will release Rs 1,37,000 crore across banking system. — Accommodation under Marginal Standing Facility to be increased from 2% from SLR to 3% with immediate effect till June 30. It will release Rs 1.37 lakh crore into the system. Combined, these three measures will make available a total Rs 3,74,000 crore to the country's financial system. After cutting policy rates five times in the past one year, the RBI had been on a pause since December in view of high inflation. Banking system is safe and sound, the governor insisted, adding that it would be fallacious to link share prices to banks' fate. He implored Indians not to worry about their bank deposits.