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Repo rate remains unchanged at 4%, says Governor Shaktikanta Das

Last Updated 06 August 2020, 07:48 IST

With inflation likely to remain sticky and economic growth fragile due to surge in Covid-19 cases, the monetary policy committee (MPC) of Reserve Bank of India Thursday pressed a pause button on key policy interest rates with Governor Shaktikanta Das saying he has enough space for reducing rates but he will use them “judiciously”.

The MPC kept the repo rate at which the RBI lends money to banks unchanged at 4% while maintaining an accommodative stance. The reverse repo rate was kept unchanged at 3.35%.

The headline CPI inflation, which was at 5.8% in March 2020 and it got elevated to 6.1% in June.

The RBI has already reduced the repo rate by a total of 250 basis points since last year, which the Governor said, has resulted in a lowering of the interest rate across the financial system. He said the borrowing rate in the financial system has come down to the lowest in 10 years.

The Governor said inflation will remain elevated in the July-September quarter but would start easing in the second half of the financial year 2020-21.

Weighed down by the spike in virus cases, the real GDP growth will remain in negative zone in the current fiscal ending March 31, 2021.

It is because of the same reason, the central bank allowed stressed MSME borrowers to restructure their debt if their accounts were classified standard.

It also announced a Rs 10,000 crore additional liquidity facility to be provided by NHB and NABARD.

To mitigate Covid-19 impact, the RBI announced loans against gold will be enhanced to 90% of the value. This relaxation shall be available until March 31, 2021.

Until now, loans sanctioned by banks against pledge of gold ornaments and jewellery for non-agricultural purposes was 75% of the value of gold ornaments and jewellery. With a view to mitigating the impact of Covid-19 on households, it has been decided to increase the permissible loan to value ratio (LTV) for such loans to 90 percent.

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(Published 06 August 2020, 06:42 IST)

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