Highlights: RBI reduces repo rate by 75 bps to 4.4%; slashes CRR by 100 bps

The Monetary Policy Committee (MPC) has decided to reduce the reverse repo rate by 90 basis points (bps) to 4 per cent, and cash reserve ratio by 100 bps to 3 per cent

A day after Finance Minister Nirmala Sitharaman released a Rs 1.7 trillion package to curb the impact of the 21-day coronavirus lockdown, the Reserve Bank of India (RBI) on Friday cut benchmark interest rate by 75 basis points to 4.4 per cent to deal with the hardship caused due to the outbreak of Covid-19.

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. RBI will maintain accommodative stance, Governor Shaktikanta Das said while announcing decisions of Monetary Policy Committee (MPC).

"MPC voted for sizeable reduction in interest rate," he said.
 

Highlights of RBI Governor Shaktikanta Das press conference:

• Reserve Bank of India (RBI) Governor Shaktikanta Das is addressing the media through video conference in view of extraordinary circumstances arising out of the coronavirus crisis.
• RBI advanced its meeting from March 31 and April 3, and held its meetings on March 24, 26 and 27. MPC has voted in favour of a sizeable reduction in repo rate. 
• MPC has agreed to reduce the policy repo rate by 75 basis points to 4.4 per cent. "War effort has been mounted to revive the economy through both conventional and unconventional means. Tough times don't last, tough people and institutions do", said Das. 
• According to the governor, the central bank has quarantined 150 members as part of a continuity plan. Rising probability that large parts of the global economy will slip into recession. 
• India FY20 GDP growth forecast of 5 per cent is now at risk. If supply chain disruptions get accentuated due to the Covid-19 pandemic... the global slowdown could increase, the governor said. 
• Inflation likely running 30 basis points above RBI expectations this quarter. Aggregate demand may weaken due to coronavirus and ease core inflation.
• No specific growth and inflation expectations from MPC this time as these would be contingent on the intensity of the coronavirus spread
• Macroeconomic risks, both on demand supply, due to the pandemic would be severe
• Banks and other financial institutions should do all that they can do to keep credit flow going
• Time for RBI to unleash an array of instruments to bolster the economy
• RBI to conduct auction of repo of 3-year papers to the tune of Rs 1 trn at a floating rate
• CRR: Cash reserve ratio reduced for all banks by 100 basis points to 3 per cent for one year
• Minimum daily CRR balance requirement reduced from 90 per cent to 80 per cent... one-time dispensation up to June 2020
• Marginal standing facility reduced to 2 per cent of SLR. Policy rate corridor widened from 50 basis points to 65 bps
• Regulation and supervision:

Moratorium on term loans: All commercial banks permitted to allow a 3-month moratorium on repayment of term loan EMIs

Deferment of working capital interest repayment: Three-month deferment on payment of interest

Easing of working capital... lending institutions allowed to reassess  

NSFR: Deferred to Oct 2020

Capital buffers: Implementation of last tranche of CCB deferred to Sep 30, 2020

• RBI injects Rs 3.74 trn into the system as a result of all the announcements made today
• Depositors requested not to panic; their deposits are dafe: Das 
• Fundamentals of the Indian economy are more sound than they were in the aftermath of the previous global financial crisis