The Reserve Bank of India (RBI) left the repo rate unchanged at the existing 4% on Thursday, following a three-day meeting of its six-member Monetary Policy Committee (MPC).
Addressing the media, RBI governor Shaktikanta Das said, “An accommodative stance of the monetary policy will continue as long as necessary to revive growth and mitigate the impact of the pandemic while ensuring that inflation remains within target going forward. RBI is perhaps the only central bank in the world which has set up a special quarantine facility for continuity of critical operations.”
Repo rate is the rate at which the RBI lends funds to commercial banks. Since February, RBI had already reduced the repo rate by a total of 115 basis points.
“Taking all factors into consideration, the GDP growth in the first half of the year is estimated to remain in the contraction zone. For the year 2020-21 as a whole, real GDP growth is also estimated to be negative,” said Das.
Restructuring loans for MSMEs
“The existing loan restructuring scheme for micro, small and medium enterprises (MSMEs) has provided relief to a large number of firms”, the RBI Governor said.
“It has been decided that, in respect of MSME borrowers facing stress on account of the economic fallout of the pandemic, lending institutions may restructure the debt under the existing framework, provided the borrower’s account was classified as standard with the lender as on March 1, 2020. This restructuring shall be implemented by March 31, 2021,” said RBI.
Additional liquidity facility for NHB, NABARD
Das also announced an additional special liquidity facility (ASLF) of ₹10,000 crore to National Housing Bank to address the needs of housing and non-banking financial sectors on account of disruptions caused due to the pandemic. Moreover, RBI will provide ASLF of ₹5,000 crore to NABARD for a period of one year at the RBI’s policy repo rate.
Relaxation on loans against gold To mitigate the impact of the pandemic, RBI decided to increase the permissible loan-to-value ratio (LTV) to 90% on loans against pledge of gold ornaments and jewellery for non-agricultural purposes.
