The Reserve Bank of India (RBI) has initiated a host of measures aimed at minimising the damage from covid 19.
The Indian central bank announced the stimulative measures just hours after Moody’s Investors Services slashed India’s growth for 2020 from 5.3% to 2.5%.
The Monetary Policy Committee (MPC) decided by a 4-to-2 majority to reduce the benchmark policy interest rate (repo rate) by 75 basis points to 4.4%.
MPC is a committee of the Reserve Bank of India (the Central Bank in India), headed by its Governor, which is entrusted with the task of fixing the repo rate to contain inflation within the specified target level.
Much-awaited EMI relief
The Central bank announced a three-month moratorium on the equated monthly instalment (EMI) for all outstanding loans. The EMI is the monthly payment on loans.
“All commercial, regional, rural NBFCs and small finance banks are being permitted to allow a 3-month moratorium on payment of instalments in respect of all term loan EMI outstanding on March 31,” the central bank said in a statement.
The moratorium will apply to corporate loans, home loans, car loans, and personal loans.
Unless there’s an announcement to the contrary, EMI payments will resume after the three-month moratorium.
India’s middle class had been clamouring for a break from paying their loans after the 21-day lockdown came into effect to contain the spread of the coronavirus epidemic.
The lockdown has forced businesses to close their doors, and factories have had to shut down. As a result, many workers have been forced to take unpaid leave.
“Keep credit flowing”
RBI governor Shaktikanta Das has stressed the need for keep credit flowing to the stressed areas of the economy.
Das predicted a major recession heading for the world economy, of which India will not be immune. The fate of India will depend mostly on how the country responds to the situation, he said.
For the time being, thousands of people whose jobs, salaries, and appraisals are at stake—as well as businesses that have to pay monthly instalments on loans—will get some reprieve as part of the relief package.