Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday addressing a news conference said the Monetary Policy Committee (MPC) has voted to reduce repo rate by 40 basis points from 4.4% to 4%. Reverse repo rate stands reduced to 3.35%. He said that an off-cycle meeting was done in the past three days on account of the government announcing the Aatmanirbhar package.
Das said that the volume of world trade can shrink by 13-32% this year, adding that there is a collapse in demand in both urban and rural demand since March 2020. "The biggest blow from COVID-19 came from private consumption slump with consumer durables production falling 33% in March 2020," the RBI Governor said. "Industrial production shrank by close to 17% in March with manufacturing activity down by 21%. The output of core industries contracted by 6.5%," Das added.
Shaktikanta Das stated that India's foreign exchange reserves have increased by 9.2 billion during 2020-21 from 1st April onwards. So far, up to 15th May, foreign exchange reserves stand at 487 billion US dollars. "The GDP growth in 2020-21 is expected to remain in the negative category with some pick up in the second half," he added.
Das announced that the loan moratorium will be extended till August 31. This makes it a six-month moratorium. He added that the lending institutions are being permitted to restore the margins for working capital to the origin level by March 31, 2021.
The RBI Governor announced four measures which can be divided into four categories:
He concluded by saying that the RBI will continue to be vigilant and will take whatever measures are needed to be taken due to the COVID pandemic.
This was the central bank head's first media address since Finance Minister Nirmala Sitharaman concluded the fifth and last tranche of the Rs 20 lakh crore financial stimulus package announced by Prime Minister Narendra Modi. This was also the third news conference by Das in the context of Coronavirus related measures in the last two months. The first one was held on March 27 and the second one was on April 17. In these two pressers, the RBI governor had announced several measures to ease liquidity pressure in the banking system and to boost the economy from the COVID-19 pandemic.