RBI Repo Rate Cut - 3-Month Moratorium on Loans


1.       The Repo Rate is the key interestrate of the RBI. It is at this rate that it gives short-term loans to commercial banks. Now, in this situation today the repo rate cut was of the largest magnitude ever done so far. Previously, the largest cut delivered was 35 basis points in August 2019.
2.       Additionally, a 100 basis point cut was announced in the Cash Reserve Ratio for 1 year. This step is taken to ensure that there will be adequate liquidity system-wide. Cash reserve ratio is the amount of money in cash banks have to keep with the RBI. This step is to release liquidity as much as Rs. 1,37,000 crores in all banks.
3.       A 3-month moratorium period on loans is presented by the RBI to banks and other lenders. This is done to ensure that there is enough credit flow. This stage will benefit banks as well as the common man by allowing them a relief in these hard times.
4.       According to Mr. Das, the priority now is to have ‘strong and purposeful action“ for protecting the Indian economy in its fight against Covid-19. The economic outlook globally is uncertain and obviously negative... Financial stability is the topmost priority of the RBI in this crisis
5.        The step to change the repo rate was taken to safeguard the Indian economy at a time when the coronavirus is visibly affecting the industry.
6.       The Governor or the RBI has reassured citizens by saying “Indian banking system is safe and sound... In spite of the challenging environment, I remain optimistic.”
7.       The Reserve Bank Of India has already given a stimulus package to the industry, in the form of Rs. 2.7 lakh crore to India’s financial system. This step was carried out after RBI’s February policy meeting. The RBI’s current liquidity injection ratio to the country’s GDP is 3.2%. Mr. Shaktikanta Das further says that if any other steps are required to be taken to safeguard that Indian economy, they shall be taken. On Thursday, 26th March 2020, 1.7 lakh crore as a fiscal package was provided to support the poor through food security measures and direct cash transfers. However, details as to how this would be implemented was not provided.
8.       Currently, India is looking at the lowest GDP expansion since the global financial crisis of 2008-2009. Many economists predict a bigger blow to the economy because of the coronavirus outbreak.

Comments

Post a Comment

Popular posts from this blog

The Six Best Types of Loans you can Opt for during Hard Times

Banks and other lenders do not wish to give out new loans right now. It is too risky for them. Thus, they are acting conservatively right now, and targeting only a limited segment of the population as their preferred customer segment. However, if you are in need of an emergency fund, help is at hand. Loan against property These loans are sanctioned against collaterals of residential, commercial and interest property. The interest rates of LAP starts from 8.95% on an average. But it does depend on the lender, the amount of loan, the lender’s credit profile and other things. The maximum tenure is 20 years. Amount of loan depends on property valuation and the borrower’s repayment capacity. Gold Loan Bank’s may not want to give traditional loans like personal loans right now, but they are very eager to give gold loans. Why? That’s because gold loans are secured loans . You can get gold loans within a few hours after you apply. The amount you get as a loan can be 75% of the gold value and ...
Read more

Family Vacation - How to Save for Your Family Vacation

 Make a travel budget and stick to it Let’s face it. Buying a travel plan, going on a vacation, through a travel site or a travel agent can be expensive nowadays. They don’t just sell you trips, they sell experiences. And that is why a trip to Switzerland is more expensive than a trip to your local hill station. This is why it is important to have a budget, and to stick to it. There are so many ways to cut down costs. First of all, you can stay closer to home than leaving the state altogether. In case you really do want to take a trip abroad, take a vacation where it shall be more worthwhile. One thing to keep in mind is the international exchange rate. And here’s how to capitalize on the exchange rate. Check where your budget shall take you the furthest based on the exchange rate, and then pick the places where you want to go. It is prudent to research this rate before booking, instead of the other way around. Make short term sacrifices No matter where you are planning to go, you...
Read more

50/30/20 Budget - How Much Can You Spend Every Month?

 What you want is less money going out than coming in. In other words, your expenses need to be less than you’re your net income. Thus, before you think of buying something substantial, create a budget which takes care of your wants and needs. How much should you spend? When it comes down to your spending, it will be a good idea to use the 50/30/20 budget . When you use this formula, you can devote 50% of your net income to meeting needs like insurance and rent, 30% towards vacations and gym memberships, and 20% to things like savings and debt repayment. As you can see, your needs come before your wants, and what you spend always depends on how much you earn. Start with your net income At the end of each month, or at the beginning of the next month, you get your salary. It may look like a huge sum at first, but there is a limit to how much you can buy with it or do with it. That is why you need a budget. Now, start with your net income, which is your income after payroll deductions...
Read more