Hailing the steps taken by the Reserve Bank of India (RBI), Prime Minister Narendra Modi on Friday said that it will enhance liquidity and improve credit supply. He added that the measures by the RBI will be a boost to the small businesses and MSMEs, farmers, as well as the poor.
Today’s announcements by @RBI will greatly enhance liquidity and improve credit supply. These steps would help our small businesses, MSMEs, farmers and the poor. It will also help all states by increasing WMA limits.— Narendra Modi (@narendramodi) April 17, 2020
The Reserve Bank of India on Friday cut the reverse repo rate and announced a slew of measures including a re-finance window of Rs 50,000 crore and targetted long term repo auction of similar amount to deal with the impact of the COVID-19 pandemic. The central bank's Governor Shaktikanta Das assured that RBI will use all instruments at its disposal to deal with the challenges posed by the outbreak of the novel coronavirus, depending on evolving situations. This is not the last of the announcements. Based on evolving situations, the central bank will come up with responses in the future in the interest of the economy, he said.
In a video message, Das said in order to encourage banks to deploy the surplus funds in investments and loans in productive sectors of the economy, it has been decided to reduce the fixed-rate reverse repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 4 percent to 3.75 percent with immediate effect. The reverse repo rate is the rate banks earn by parking deposits with the RBI. "The policy repo rate remains unchanged at 4.4 percent, and the marginal standing facility rate and the bank rate remain unchanged at 4.65 percent," he said.
READ | While automobile sales took a plunge, electricity demand has fallen sharply: RBI Governor