After the meeting held by the Reserve Bank of India (RBI)’s monetary policy committee (MPC) it has been decided to keep the repo rate unchanged says RBI Governor – Shaktikanta Das!

RBI had reduced it by 115 basis points earlier this year seeing the economic impact of the coronavirus pandemic. The cut in the interest rate by 115 basis points has brought the repo rate down to 4%, which is lowest since the year 2000.

Meanwhile, MPC will remain observative/watchful concerning inflation dynamics to further use space available on the monetary side when appropriate. 

In his address, The RBI Governor also added that stimulus measures are also taken, which includes Additional liquidity of ₹ 5,000 crores to be infused in National Housing Bank (NHB). The step is quite appreciative as doing this will definitely aid the reeling sector to tide over the liquidity crisis.

Mr Das also stated that the economic activities had started to recover, but the surge in the infection (no. of corona cases in the country) has forced to impose lockdowns. 

Global economic activities remained fragile & imports fell sharply in June. Well, from all these statements it can be estimated that this has impacted our economy and has contributed to the fall in GDP growth.

Apart from all the statements made- the highlight remains that- “GDP growth is estimated to be negative for the year 2020-21”!

Good news for MSMEs who were/are suffering currently:

RBI allowed stressed MSMEs borrowers to restructure their debt if their borrowing were considered as standard as on 1st March 2020. Well, this can be a huge relief for the MSMEs who are in loss due to the coronavirus pandemic.

Attributing to the ‘Households’ the RBI has increased the permissible loan to value ratio (LTV) for loans given against gold from 75% to 90% till March 2021. 

Well, the Reserve Bank of India’s change in the monetary policy creates a fine balance between the challenges prevailing due to the global COVID-19 pandemic and the supportive measures. It seems the changes are supportive in order to maintain financial stability and liquidity.