Following this, the reverse repo rate, or the rate at which the banks perk extra liquidity with the RBI, was reduced to 3.35 per cent from 3.75 per cent - both at their historic lows.
Earlier today, the RBI slashed the repo rate by 40 basis points to 4 per cent and extended the loan repayment moratorium for another three months up to August 31
The RBI has extended moratorium period by another three months till August 31, 2020.
This has been done to stop lazy banking. Banks are being encouraged to lend instead of parking their resources with the RBI and earn risk-free interest income
Cloudy earnings outlook in the coming quarters is likely to play spoilsport
The timely and decisive action by the Reserve Bank of India (RBI) provides vital liquidity and ensures that credit lines remain open
The Union Bank CEO said that the RBI's package would help in sustaining business at a time when a 21-day nationwide lockdown to stop the spread of the COVID-19 virus
The move comes after the global central banks have been cutting rates to help shore up the economy amid coronavirus pandemic
Lowering rates at this time also carry the risk of affecting deposits, as banks will have to rework their deposit rates considering that the lending rates have already been affected.
If Guc Das announces a rate cut, it will be first inter-meeting rate reduction since the monetary policy committee was instituted in February 2016
Amid talk of a review of the flexible inflation targeting framework, it said the revised contracts will introduce growth and financial stability as co-objectives of monetary policy along with price st
RBI has the official mandate of keeping CPI inflation at 4 per cent, with a 2% band
It said a rate cut is unlikely to work in isolation as bank transmission of RBI's rate cut has been slow
Going forward, we think that the scales could tip in the favour of growth as soon as inflation prints become more palatable," the report by HDFC Bank's economists said
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'We expect a gradual recovery in income growth right into the second half of next year', said Das
The central bank, which reviews policy on Thursday, should look to pull down long-term yields by selling short-tenor bonds and reinvesting in longer-term ones, said Suyash Choudhary
RBI has delivered 135 basis points of interest-rate easing this year, but lenders have only transmitted a fraction of that to borrowers.
A rate cut on expected lines would boost the equity indices
Even as market rates have fully reflected the rate cuts, companies are not necessarily in the mood for borrowing, as they face a slump in consumption demand and investment in the country