Amidst COVID-19 and lockdown 4.0, the Reserve Bank of India (RBI) reduced repo rate by 40 basis points to 4 per cent in an effort to further boost liquidity in the economy which has been reeling under the impact of COVID-19 induced countrywide lockdown.
As a result, the reverse repo rate stands at 3.35 per cent, said RBI Governor Shaktikanta Das. The six-member monetary policy committee (MPC) voted 5:1 in favour of the decision.
Repo rate is the rate at which a country’s central bank lends money to commercial banks, and the reverse repo rate is the rate at which it borrows from them.
Further, in another major announcement, Reserve Bank Governor Shaktikanta Das has extended the moratorium on payment of loans by another three months till August to provide much-needed relief to borrowers whose income has been hit due to the coronavirus crisis.
Headline inflation may remain firm in the first half of the year and may ease in second half. Inflation may fall below 4 per cent in the third or fourth quarter of the current fiscal, according to the Governor. Further, Das said government revenues have been impacted severely due to the slowdown in economic activity amid the pandemic.