India's cenbank surprises with reverse repo rate cut in bid to spur bank lending

Record ID: 1470060

  • Title: India's cenbank surprises with reverse repo rate cut in bid to spur bank lending
  • Date: 17th April 2020
  • Summary: MUMBAI, MAHARASHTRA, INDIA (FILE) (ANI - NO USE INDIA) VARIOUS OF SECURITY PERSONNEL STANDING OUTSIDE RBI
  • Embargoed: 1st May 2020 09:41
  • Keywords: India Mumbai Reserve Bank of India coronavirus health repo rate reverse repo rate
  • Location: MUMBAI, MAHARASHTRA, INDIA
  • City: MUMBAI, MAHARASHTRA, INDIA
  • Country: India
  • Topics: Health/Medicine
  • Reuters ID: LVA005C9VPG0F
  • Aspect Ratio: 16:9
  • Story Text: The Reserve Bank of India unexpectedly cut its key deposit rate for the second time in three weeks on Friday (April 17) to discourage banks for parking idle funds with it and push them toward lending to revive the flagging economy amid the coronavirus lockdown.
    The RBI cut its reverse repo rate by 25 basis points (bps) to 3.75% with immediate effect, RBI Governor Shaktikanta Das said in a video conference. The rate had already been cut by 90 bps on March 27.
    The central bank kept its benchmark repo rate unchanged at 4.40% after a 75 bps cut last month.
    Since his last address on March 27, Das said that India's economic and financial landscape has "deteriorated precipitously" in some areas.
    Prime Minister Narendra Modi extended on Tuesday a lockdown of India's 1.3 billion population till May 3 as the number of coronavirus cases went past 10,000 despite a three-week shutdown announced last month.
    "In order to encourage banks to deploy these surplus funds in investments and loans in productive sectors of the economy, it has been decided to reduce the fixed rate reverse repo rate," Das said.
    Indian banks have been extremely wary of lending over the last few quarters as the economy has cooled and those fears have only increased in recent weeks as business activity collapses.
    The RBI also announced another round of targeted long-term repo operations and other regulatory measures for banks.
    However, analysts believe much more help will be needed from the government to help tide over the crisis.
    The government so far has only announced a $22 billion package targeted at the poor but refrained from any big bang measures.
  • Copyright Holder: ANI (India)
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