RBI cuts reverse repo rate from 4% to 3.75%

RBI cuts reverse repo rate from 4% to 3.75%

The Reserve Bank of India Governor Shaktikanta Das on Friday said the central bank will ensure adequate liquidity in the system to ease the financial stress caused by the COVID-19 pandemic.

The central bank reduced the reverse repo rate - the rate at which banks park their fund with the central bank - by 25 basis points to 3.75 percent.

This will encourage banks to lend to the productive sectors of the economy.

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 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 percent was much more severe than global financial crisis of 2008-09.

Union Minister Piyush Goyal tweeted, "RBI Governor’s announcement to do “whatever it takes” is a massive confidence booster for the economy. RBI is continuously monitoring the economy to support growth. IMF has also projected India as one of the fastest-growing countries in the current financial year."

"Given the visionary steps taken under the leadership of PM @narendramodiji to protect the lives of the people, today’s steps by RBI to support the economy will provide liquidity for growth & help India emerge as a world leader in a post-COVID-19 world," he added in another tweet.