RBI ‘s historic decision, Relief provided in Loan EMIs 3 month

RBI’s historic decision, Relief provided in Loan EMIs: RBI has cut the repo rate by 75 bps therefore decreasing it from 5.15% to 4.40% now. Due to this banks will be able to get loans from the RBI at a low rate of interest.

This decision of RBI has provided a huge relief to the banks amidst the coronavirus pandemic. This move comes in the wake of economic damage done by the coronavirus pandemic. RBI has announced a series of measures to fight the crisis. So, relief is provided in all loans. RBI has allowed a three-month moratorium on all outstanding loans. Consequently, no EMI will be deducted from the accounts during this three month period. 

EMIs will resume after the moratorium period. 

rbi-governor-shaktikanta-dasRBI has also said that this move will have no effect on the rating of the creditor, i.e. the credit history (or the credit score) of the borrower. It has also advised banks to provide discounts on the EMI, it is expected that such an announcement will be made by banks very soon. This information has been provided by RBI governor Shashikant Das in a press conference.

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Key Points

  • RBI has cut the repo rate by 75 bps therefore the current repo rate stands at 4.40% which was 5.15% previously. This will allow the banks to take loans from RBI at a cheaper rate.
  • RBI has also reduced the reverse repo rate by 90 basis points. Thus, the reverse repo rate stands at 4% now. Reverse repo rate is the rate at which RBI takes loans from banks on short term.
  • Banks and NBFCs have been provided with a 3 month moratorium allowing them relief to return the loan for 3 months.
  • RBI has cut the cash reserve ratio (CRR) by 100 basis points reducing it to 3%. This has been done for a period of one year. This will add 1.37 lakh crore rupees liquidity in the country’s banking system.
  • RBI governor once again emphasised on using digital banking and payments. He also said that in these testing times, every possible safety measure must be undertaken.
  • RBI has said that the Marginal Standing Facility Cap (MSF) has been increased from 2% to 3% as well as the Net Funding Ratio rule is being delayed for next 6 months.
  • RBI has reduced Liquidity adjustment facility (LAF) by 0.90 to $% now. This will clear the way for more liquidity in the system.

What is meant by Repo Rate & Reverse Repo Rate?

rbiThe rate at which RBI lends loans to other banks is called Repo Rate. on the basis of this rate only, the banks provide loans to customers. Low repo rates provide a huge relief to the banks. This benefit can be then passed on to customers like you and me.

On the other hand, Reverse repo rate is the rate at which RBI borrows from other banks. Also, it is the rate at which commercial banks receive interests on their funds deposited with the RBI.

Author:- Suramya Sharma

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