PM Modi welcomes RBI's decisions to safeguard economy from coronavirus impact

Prime Minister Narendra Modi on Friday lauded the decisions taken by the Reserve Bank of India to combat the economic slowdown triggered by the coronavirus lockdown and said that it will improve liquidity, reduce the cost of funds and help the middle class and businesses.

Taking to Twitter, Modi said that RBI has taken a giant step to safeguard the country's economy from the impact of coronavirus.

Earlier today, RBI lowered the key repo rate by 75 basis points to 4.4 per cent and reverse repo rate by 90 basis points to 4 per cent to make it unattractive for banks to passively deposit funds with the central bank and instead lend it to the productive sectors.

"Today, RBI has taken giant steps to safeguard our economy from the impact of the coronavirus. The announcements will improve liquidity, reduce the cost of funds, help middle class and businesses," Modi tweeted.

A six-member monetary policy committee (MPC) met on March 24, 25 and 27 and voted 4:2 in favour of the repo rate reduction.

"The need of the hour is to shield the economy from the pandemic... We need to mitigate the impact of coronavirus, revive economic growth and provide financial stability," RBI Governor Shaktikant Das said during a press conference today.

The RBI governor said that all banking institutions can offer a three-month moratorium on all loans for a period of three months. The RBI has also allowed banks to restructure the working capital cycle for companies without worrying that these will have to be classified as a non-performing asset (NPA).

The three-month moratorium will permit banks to avoid a large onset of NPAs during the 21-day lockdown and keep their books healthy.

This comes as the country is under a 21-day lockdown to prevent the spread of coronavirus, which according to the Ministry of Health and Family Welfare has claimed 17 lives and infected 724 people as on Friday.