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This article is more than 1 year old.

Das Capital: RBI Governor's bold measures to infuse Rs 3.74 lakh crore into economy

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Reserve Bank of India Governor Shaktikanta Das on Friday announced measures that can together inject nearly Rs 3.74 crore into the Indian economy.

Das Capital: RBI Governor's bold measures to infuse Rs 3.74 lakh crore into economy
Reserve Bank of India Governor Shaktikanta Das on Friday announced measures that can together inject nearly Rs 3.74 crore into the Indian economy. These timely measures are coming at a time the Indian economy braces for a potentially sharp slowdown while it fights to contain the spread of the novel coronavirus or COVID-19 with a 21-day lockdown.
Das said his address was coming amidst "extraordinary circumstances". He said the MPC voted for sizeable reduction in repo rate to revive growth, mitigate covid-19 impact.
For starters, the RBI's Monetary Policy Committee (MPC) decided to cut repo rate by 75 basis points and the reverse repo rate by 90 basis points. The latter is aimed at discouraging the banks from parking money with the banking regulator.
"Banks have been depositing Rs 3 lakh crore daily with the RBI in the last few days," Das announced during his press briefing on Friday.
The new repo rate now stands at 4.4 percent compared to 5.15 percent earlier, the lowest in at least 15 years. Also, it reduced the cash reserve ratio maintained by the banks for the first time in over seven years. CRR for all banks was cut by 100 basis points to release Rs 1.37 lakh crore across banking system.
RBI Governor Shaktikanta Das predicted a big global recession and said India will not be immune.
It all depends how India responds to the situation, he said.
Global slowdown could make things difficult for India too, despite some help from falling crude prices, Das said, adding food prices may soften even further on record crop production.
Aggregate demand may weaken and ease core inflation further, he noted.
The liquidity measures announced include auction of targeted long-term repo operation of 3 year tenor for total amount of Rs 1 lakh crore at floating rate and accommodation under Marginal Standing Facility to be increased from 2 per cent to 3 per cent of Statutory Liquidity Ratio (SLR) with immediate effect till June 30.
Combined, these three measures will make available a total Rs 3,74,000 crore to the country's financial system.
After cutting policy rates five times in 2019, the RBI had been on a pause since December in view of high inflation.
Shaktikanta Das' address to the media came a day after Finance Minister Nirmala Sitharaman announced a Rs 1.7 lakh crore package of free foodgrains and cash doles to the poor to deal with the economic impact of the unprecedented 21-day nationwide lockdown.
While the Monetary Policy Committee (MPC) of the RBI originally was slated to meet in the first week of April, it was advanced by a week to meet the challenge of coronavirus.
-with inputs from agencies
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