The Reserve Bank of India has announced a 40 basis points reduction in key policy rates while estimating that Indian economy will shrink in 2020-21.
The repo reduction marked the lowest repo rate or the key interest rate at which the RBI lends short-term funds to commercial banks. This is the reduction that has been recorded since 2000.
The reduction in the key interest rate will allow banks to reduce the Equated monthly installments (EMI) burden for their borrowers.
RBI also extended the loan moratorium, which allows banks to defer EMI payments by their customers, by another three months till August 2020.
On 27 March 2020, RBI slashed the benchmark interest rate by 75 bps and also announced a 3-month moratorium to be given by banks to provide relief to borrowers whose income has been hit due to the lockdown.
RBI also introduced several steps to ease the pressure faced by borrowers, lenders, and other entities. RBI took more initiatives to deal with the COVID-19 pandemic.
