RBI governor Shaktikanta Das on Friday 27th March 2020 announced a cut on repo rates by 75 basis points. He said this is an extraordinary condition and these steps have been taken in view of the Covid-19 pandemic to preserve the economic stability & to boost liquidity in a stimulus worth 3.2% of GDP.
HIGHLIGHTS: WHAT RBI Governor Announced
- Cut in repo rate by 75 basis points, which is bringing it from 5.15% to 4.4%, which is the lowest ever.
- Reverse repo rate reduced by 90 basis points, bringing it to 4%.
- The biggest one: Lending institutions can allow a three-month moratorium on EMI payments. This means now debtors are legally authorized to postpone their EMI payment for three months.
- Deferment on loan and interest repayments will not be considered as defaulting and hence will not impact the borrower’s CIBIL.
- Liquidity worth 3.74 lakh crore to be injected by RMI into the system.
- The RBI governor assured depositors that their money is safe in private banks, and the public should not start panic withdrawals.
- Mr. Das added also said that the bank stocks crash should not be a matter of worry for the depositors.
- The Cash Reserve Ratio (CRR) of all banks has been reduced by 100 basis points which are 3%.
Impact of the rate cut on borrowers:
- This unexpected rate cut is in the great favor of the borrowers. As the RBI said all these steps have been taken to counter the economic impact of the coronavirus pandemic.
- The rate cut announced by the RBI governor is the lowest ever.
- This will likely reduce the EMI for your ongoing loans.
- Opting for a new loan will become cheaper.
- The bank is likely to offer more loans.
All these cuts on rates are in view of the Covid-19 crisis and in order to mitigate its impact on the economy.
On 26th March our honorable Finance Minister has also made several announcements to fight the Covid-19 pandemic. The major announcements made by her included-
- ₹1.7 lakh crore relief package for the poor.
- ₹50, 00,000 insurance cover for the warriors you are fighting with this pandemic on the front. (for Doctors, nurses, Asha, Pharmacists, etc.)
- Ujjwala beneficiaries get free LPG cylinders for three months.
- EPFO to allow 75% non-refundable advance or 3 months of salary whichever is lower.
- Government to pay EPF contribution, for both the employer and employee for the next 3 months for all those companies with less than 100 employees where 90% earn less than ₹15,000 per month.