The Reserve Bank of India (RBI) Governor Shaktikanta Das addressed the media on March 27, 2020 on the impact of COVID-19 on the Indian economy and announced certain measures to deal with the crisis.
The RBI Governor noted that the current economic outlook is highly dependent on the duration, intensity and spread of Coronavirus. He stated that there is a high possibility that large parts of the world will slip into recession.
Further, Das stated that shallow recovery is expected in 2020 after a decade low’s in global growth in 2019. The Monetary Policy Committee has reported that global economic activity has come to a near stand-still due to the various lockdowns imposed to combat COVID-19 spread and implement social distancing.
RBI Governor’s media address: Key Highlights
- The repo rate has been reduced by 75 basis points from 5.15 percent to 4.4 percent.
- The reverse repo rate reduced by 90 basis points to 4 percent to incentivise banks to lend.
- CRR: Cash Reserve Ratio of all banks reduced by 100 basis points to 3 percent of net demand and time liabilities with effect for one year from March 28. CRR has been cut to unlock liquidity.
- Moratorium on term loans: All the lending institutions have been allowed a moratorium of 3 months.
- Demand: Aggregate demand may weaken.
- GDP growth: The GDP growth of the last quarter of fiscal year 2019-20 and FY 20-21 is likely to be affected.
- Liquidity: 3.74 lakh crore liquidity injected
Global Economic Outlook
The RBI Governor noted that the global economic outlook is highly uncertain and negative as many nations are struggling to contain the virus. Several nations have imposed lockdowns to deal with the crisis.
Indian Banking System
The RBI Governor has assured that the Indian Banking System is safe and sound and there is no need for the depositors of private and commercial banks to worry about the safety of their deposits. He said that COVID-19 related volatility impacted the share prices of the banks in the recent past, resulting in panic withdrawal of deposits from a few private sector banks. However, this time there is no need to worry and indulge in such withdrawals.
The RBI Governor’s address comes just a day after Union finance minister Nirmala Sitharaman unveiled the new economic package to deal with the coronavirus impact on the economy and provide relief to the poor and most vulnerable. The measures worth about Rs 1.70 lakh crore is expected to reduce the impact of the outbreak in the economy and on people.