New Delhi: The Reserve Bank of India (RBI) on Friday (April 17) reduced the reverse repo rate by 25 basis points from four per cent to 3.75 per cent in a bid to inject liquidity in financial markets. However, the repo rate remains unchanged. This comes amid the COVID-19 pandemic and the subsequent countrywide lockdown.
RBI Governor Shaktikanta Das said the liquidity injection has been 3.2 per cent of GDP since February 6 to March 27. “The RBI has been taking pro-active measures and monitoring the situation closely. The contraction in exports at 34.6 per cent has been much worse than 2008-09 global financial crisis,” Das said.
He said that India is expected to post a sharp turnaround by growing at 7.4 per cent in 2020-21
“For 2020-21, International Monetary Fund projects sizable reshaped recoveries, close to 9 percentage points for the global GDP. India is expected to post a sharp turnaround and resume its pre-COVID, pre-slowdown trajectory by growing at 7.4 per cent in 2020-21,” the RBI Governor said, adding that banks, financial institutions have risen to occasion to ensure normal functioning during the outbreak of the pandemic.
With regard to other measures, Das said RBI will begin with giving an additional Rs 50,000 crore through targeted long-term repo operation (TLTRO) to be undertaken in tranches. Besides, he announced a re-financing window of Rs 50,000 crore for financial institutions like Nabard, National Housing Bank and Sidbi.
He further said surplus liquidity in the banking system has increased substantially as a result of the central bank’s actions.
Stating that the RBI is monitoring the situation developing out of COVID-19 outbreak, he noted that the contraction in exports in March at 34.6 per cent was much more severe than the global financial crisis of 2008-09. He said automobile production and sales declined sharply in March while electricity demand has fallen sharply.
This is the RBI Governor’s second press briefing since the coronavirus COVID-19 outbreak began in India. In his previous address on March 27, he had announced a rate cut of 75 basis points.