RBI announcement to tackle Corona & Its impact

Here is the summary of announcement from RBI

RBI

To read Tamil version of this article - கொரோனாவிற்கு எதிரான போரில் அரசுடன் கைகோர்த்த ரிசர்வ் வங்கி - அறிவிப்புகள் மற்றும் அதன் விளைவுகள்

1. RBI allows deferment of EMIs upto 3 months

Above announcement applicable for loans taken from Banks (public, private, regional, cooperative), NBFCs (like Bajaj Finance, DHFL) which includes housing finance companies, small savings banks (like Equitas)

What to watch out for : RBI only give power for banks to defer. Its upto banks to do it. I hope banks will comply this time

2. RBI allows deferment of loans for business upto 3 months

Loans for business Establishments gets deferred upto 3 months. This move will certainly help MSME which got hit mostly by 21 day lockdown

What to watch out for : RBI only give power for banks to defer. Its upto banks to do it. I hope banks will comply this time

2. RBI cuts Repo rate by 75 bps to 4.4%

This is the lowest repo rate we ever have. This means banks will get money from RBI at cheaper rate. So banks can lend to its customer in cheaper rate too. Even existing home loan & other loan interest can come down

What to watch out for : Now its upto banks to pass on the rate cut benefits to the customers. We have seen banks not passing the benefits entirely on previous rate cuts

3. RBI cuts Reverse Repo rate by 90 bps

Reverse repo denotes the interest banks get for parking their money in RBI. Since it gets reduced, banks won't find it attractive to park money in RBI. Hence they have to find some other way to make more interest. Hence they will give more loans to customers. This move will increase liquidity in the economy considerably

What to watch out for : This may trigger more inflation. But for now worries about inflation can wait. This move may reduce interest rate on Fixed Deposits 

4. Reduction of CRR for all banks by 100 basis points (1%)

CRR stands for Cash Reserve Ratio. It denotes the minimal amount that has to be kept by banks in RBI anytime. By cutting CRR 1%, banks will get more liquidity. According to estimates, this move will give banks 1.37 lakh crore money.

What to watch out for : This may trigger more inflation. But for now worries about inflation can wait

Overall Impact

• This move ensures more liquidity in the system & help recovery of economy
• This move gonna make the interest rate on home loan and other loans cheaper
• This move may reduce interest on fixed deposit
• This move may shoot up inflation