Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced a cut of 75 basis points in the repo rate to 4.4 per cent, after an unscheduled meeting of its Monetary Policy Committee. Repo rate is the key interest rate at which the RBI lends short-term funds to commercial banks. Four out of the six members of the Monetary Policy Committee voted in favour of the move, the RBI Governor said. “The economic outlook globally is uncertain and obviously negative… Financial stability is the topmost priority of the RBI in this crisis,” said Shaktikanta Das.
The RBI Governor also announced a cut of 100 basis points in the cash reserve ratio for a period of one year, a step he said will ensure sufficient liquidity in the system. CRR or cash reserve ratio is the amount of cash commercial banks have to mandatorily park with the Reserve Bank of India.
The surprise moves came as India entered the third day of a 21-day countrywide lockdown to curb the rapid spread of the coronavirus pandemic.
The RBI Governor-headed Monetary Policy Committee was originally scheduled to meet early next month.
India is staring at the worst annual rate of gross domestic product (GDP) expansion recorded since the 2008-09 global financial crisis.