RBI keeps repo rate unchanged: Key things to know

NEW DELHI: The

Reserve Bank of India

(RBI) on Thursday decided to keep key lending rate unchanged in its August policy review meeting. The six-member monetary policy committee (MPC), headed by RBI governor

Shaktikanta Das

, kept repo rate untouched at 4 per cent; and reverse repo rate at 3.35 per cent while maintaining the accommodative stance.

Repo rate is the rate at which the RBI lends to banks, while reverse repo rate is at which it borrows from banks.

Here are the top points on RBI’s policy review:

* Rs 10,000 crore additional liquidity facility to be provided by NHB (National Housing Bank), NABARD (National Bank for Agriculture and Rural Development), Das said.

* Das further said that loans against gold enhanced to 90 per cent of the value from current 75 per cent to mitigate Covid-19 impact on households.

* RBI allows lenders to provide window to restructure loans of corporate, individual borrowers to ease Covid-19 impact: Das

* Stressed MSME (micro, small and medium enterprises) borrowers to be eligible for restructuring of debt if their accounts were classified standard, the governor mentioned.

* Global economic activity has remained fragile; surge in Covid-19 cases has subdued early signs of revival,

RBI governor

Das stated.

* India’s economic growth to contract in first half of fiscal beginning April 2020: RBI governor

* The fast-changing macroeconomic environment and the deteriorating growth outlook necessitated off-cycle meetings of the MPC — first in March and then again in May 2020.

* The MPC has cumulatively cut the repo rate by 115 basis points (bps) over these two meetings, resulting in total policy rate reduction of 250 bps since February 2019, with an aim to boost economic growth.

* The central bank has been taking steps proactively to limit the damage to the economy caused by the pandemic and subsequent lockdowns.

* When the RBI cuts rates, banks are expected to pass on the benefit to customers and reduce interest rates on home, auto, personal or other loans which may result in lower EMIs (equated monthly instalments).

* As per a research report by State Bank of India (SBI), banks have cut rates on fresh loans by 72 bps, the fastest transmission ever recorded. However, SBI has cut by an equivalent 115 bps on its repo-linked retail loan portfolio.

* The government has tasked Reserve Bank to keep inflation at 4 per cent (+, – 2 per cent). The central bank mainly factors in CPI (consumer price-based inflation) while formulating the monetary policy.

* As per the latest data, higher prices of food items especially meat, fish, cereals and pulses pushed the retail inflation to 6.09 per cent in June. The inflation rate for the month of July will be announced on August 12.

* Meanwhile, domestic equity indices — BSE sensex and NSE Nifty — gained more than one per cent after the RBI policy outcome.

(With agency inputs)

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