The reverse repo rate slashed by 90 bps to 4 percent by monetary policy committee (MPC) headed by RBI governor Shaktikanta Das. After extensive discussions, the monetary policy committee voted unanimously for a sizeable reduction in the policy repo rate and for maintaining the accommodative stance of monetary policy as long as necessary to revive growth, mitigate the impact of COVID-19, while ensuring that inflation remains within the target.
The bank’s six-member monetary policy committee (MPC) held a meeting this week by video conference to arrive at its decision. It cut the repo rate by 75 basis points to 4.40%, in line with expectations. The reverse repo rate was reduced 90 basis points to 4%.
This was the first time in five years that the RBI has acted outside the scheduled dates for policy meetings. The MPC was originally scheduled to meet in early April. The last time RBI cut rates in an out-of-turn move was in March 2015 following a budget announcement.
The RBI also permitted banks to provide a three-month moratorium on all term loans and said it stands ready to provide necessary liquidity and take all measures essential to preserve financial stability in the domestic economy.
Indian shares inched back from session highs to fall 1% on Friday despite RBI rate cuts and an array of measures to help cope with the economic fallout from the coronavirus pandemic.
Earlier in the session, both indexes, Sensex and Nifty rose nearly 4%. The government on Thursday announced a $22.6 billion stimulus plan that provides direct cash transfers and food security measures.
Prime Minister Narendra Modi said the Reserve Bank of India (RBI) had taken giant steps to safeguard the economy from the impact of the coronavirus.
The RBI cut the benchmark interest rate by 75 basis points to 4.4 percent on Friday to deal with the hardship caused due to the outbreak of COVID-19.
“The announcements will improve liquidity, reduce cost of funds, help middle class and businesses,” Prime Minister Modi tweeted.