Highlights of RBI’s monetary policy statement

Following are the highlights of RBI Governor Shaktikanta Das’ statement and resolution of the Monetary Policy Committee (MPC):

  • RBI cuts repo rate by 40 bps to 4 pc
  • Reverse repo rate reduced to 3.35 pc
  • Second sharp reduction in key policy rates in 2 months
  • RBI advances MPC meeting to take key decisions
  • RBI Governor said it is in growth outlook that the MPC judged the risks to be gravest
  • GDP growth in FY21 estimated to remain in negative territory, with some pick-up in H2
  • Top 6 industrialised states accounting for about 60 pc of industrial output largely in red/orange zones
  • High frequency indicators point to collapse in demand beginning in March
  • MPC opined macroeconomic impact of COVID-19 is turning out to be more severe than initially anticipated
  • Various sectors of economy are experiencing acute stress
  • Economic activity other than agriculture likely to remain depressed in Q1 due to lockdown
  • Inflation outlook highly uncertain
  • Moratorium on term loan instalments extended by another 3 months till Aug 31, 2020
  • Lending institutions permitted to allow deferment of interest on working capital facilities till Aug 31
  • RBI decides to extend time for completion of remittances against imports from 6 months to 12 months for imports made before July 31
  • RBI extends a line of credit of Rs 15,000 crore to the EXIM Bank
  • Maximum permissible period of export credit increased to 15 months from 12 months
  • RBI announces measures to improve functioning of markets and market participants
  • Forex reserves increase by USD 9.2 bn in 2020-21 (up to May 15) to USD 487 bn.

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