The MPC maintained the policy stance at accommodative, RBI Governor Shaktikanta Das said. The repo rate is currently at 4 percent, while the reverse repo rate is at 3.35 percent.
What does this lead to?
- The Fixed deposit rates are not going down in a hurry now. These rates have been going down for a year now. So there could be a likely pause in the reduction in FD interest rates.
- On the other hand with no cut in interest rates - borrowers whose loans and EMIs are linked to external benchmark - are likely to pay the same EMIs. That is there is unlikely reduction in the leading rates as well.
Debt Recast
- The Reserve Bank (RBI) has allowed borrowers to to recast i.e restructure their loans which were on the verge of being declared as an NPA (non performing asset). This one time restructuring will be based on the recommendations of an expert committee, which will be appointed by the RBI, under the chairmanship of Mr. K.V.Kamath. There will be conditions on the lenders which the RBI has elaborated in its report.
- The RBI has also allowed a similar debt recast facility for personal loans as well as loans to small businesses. Stressed MSME borrowers (Micro Small and Medium Enterprises) will be made eligible for restructuring their debt provided their accounts were classified as "Standard" as on March 1, 2020.
This restructuring will have to be implemented by 31st of March 2021.
Outlook on growth and inflation
- The RBI sees inflation levels to remain elevated in this quarter but will ease in the second half of this financial year. This is on account of supply chain pressures due to the Wuhan Corona Virus crisis.
- The RBI also therefore expects risks to food inflation although it may ease in the coming quarters.
- RBI also stated that India's GDP will contract for the current full financial year ( i.e. -ve growth).
The full text of RBI Monetary policy Read Here
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