Monetary Policy Committee (Mcp) Policy announcement

Highlights of Reserve Bank of India Governor’s address to the media:

1. MPC voted for a sizable reduction in repo rate, maintaining accommodative stance in order to boost growth and maintaining financial stability while keeping inflation in the mandated range.

2. 75 basis points cut in repo rates as a measure to counter the economic slowdown caused by the COVID-19 pandemic. The reverse repo rate cut by 90 basis points to 4 per cent to make it unattractive for banks to passively deposit funds with the RBI and instead lend it to the productive sectors.

3. All lending institutions are being permitted to allow a moratorium of three months on repayment of instalments for term loans outstanding as on March 1, 2020. The moratorium on deferment of payment of term loans will not lead to asset classification downgrade or classification as default for reporting purposes.

4. Lending institutions permitted to allow deferment of three months on payment of interest w.r.t all such working capital facilities o/s as of March 1, 2020. Deferring of interest payment on working capital will also not result in asset classification downgrade.

5. CRR of all banks to be reduced by 100 basis points to 3 per cent beginning March 28, for one year. This will release liquidity of 1,37,000 crore across the banking system.

6. MPC noted that global economic activity has come to a near standstill Expectations of a shallow recovery have now been dashed. The rising probability that large parts of the world will slip into recession. Previous GDP growth estimates now at risk.

7. As a result of Covid-19, aggregate demand may weaken and ease core inflation further. Projections of growth and inflation heavily contingent on intensity, duration and spread of Covid-19. MPC refrained from giving specific growth and inflation numbers as the outlook are uncertain

Courtesy: IICCI Member Link Legal India Law Services