The Reserve Bank of India on Friday further reduced key lending rates by 40 basis points, historically lowest, to mitigate the impact of COVID-19 induced economic fallout.
The RBI Governor Shaktikanta Das announced that the Monetary Policy Committee of the central bank voted with to reduce the key-repo-rate to 4 per cent from 4.40 per cent.
While addressing a news conference, Governor Das said that the reverse repo rate has automatically been reduced to 3.35 per cent 3.75 per cent.
Besides, the Apex bank took other major decisions keeping in mind the devastating economic impact of COVID-19 pandemic.
In one such decision, the Reserve Bank extended the moratorium on interest payments on term loans and working. Spiral loans by another three months till August 31.
“The lending institutions are permitted to restore margins for Working Capital to original level by March 31, 2021,” Das said.
He added that the accumulated interest on account of the moratorium period can be converted into a term loan and does not have to be repaid immediately after the moratorium ends.
Furthermore, Governor Das noted that pandemic has had a crushing blow to the demand.
“High-frequency indicators points to collapse in demand in March, the Governor said.
Das further announced RBI’s decision to roll over the facility provided to Small Industries Development Bank of India (SIDBI) for additional 90 days.
“In order to provide greater flexibility of SIDBI, another 90 days extension for the 90-day term loan facilities will be offered,” said governor Das adding that the move will provide additional liquidity support to the MSME sector.
He added the MPC will maintain accommodative stance, therefore, leaving further for more policy action.