The central bank also reduced the Cash Reserve Ratio (CRR) of all banks by 100 basis points to 3 per cent with effect from March 28 for 1 year providing total liquidity injection of Rs 3.74 lakh crore to the system in current scenario.
While announcing decisions of Monetary Policy Committee (MPC) in a live video conferencing, RBI Governor said that RBI will maintain accommodative stance. He informed that the Monetary Policy Committee voted for sizeable reduction in interest rate. The governor informed that the MPC has decided to advance its meeting due on 3 April to 24, 25, 27 March and undertook careful evaluation of economic situation in the country.
He said that the cut in Repo Rate has been made to encourage banks to give more to business rather than deposit it with RBI. The RBI has cut Liquidity Adjustment Facility by 90 bps to 4 percent. It also announced that the Reverse Repo Rate has been reduced by 90 basis points to 4% India has locked down economic activity.
The RBI chief noted that keeping finance flowing is the ‘paramount objective’ of the RBI, while India has locker down economic activity and financial activity is under severe stress.
Finance Minister Nirmala Sitharaman today appreciated RBI’s reassuring words on financial stability. She said the three month moratorium on payments of term loan installments (EMI) and interest on working capital, has given much desired relief. She said slashed interest rate needs quick transmission. Finance Minister said the macro-economic fundamentals of the Indian economy are sound adding that economy is stronger than what it was in the aftermath of the global financial crisis of 2008-09.
Information and Broadcasting Minister, Prakash Javadekar today welcomed the steps taken by the Reserve Bank of India. In a tweet today, he said, steps announced by RBI will reduce interest burden on businesses and industries and will boost economic activities. He said, three months moratorium on repayment of EMI will help all home buyers, vehicle buyers and other customers.