The central bank will remain vigilant and in battle readiness to address dynamics of unknown future arising from COVID-19 outbreak, he added. Advertisement This brings the total moratorium periods to six months, from 1 March to 31 August.
The Reserve Bank of India (RBI) on Friday slashed interest rates, extended moratorium on loan repayments and allowed banks to lend more to corporates in an effort to support the economy which is likely to contract for the first time in over four decades.
These include deferment of interest for 3 months on working capital facilities; easing of working capital financing requirements by reducing margins or reassessment of working capital cycle; exemption from being classified as "defaulter" in supervisory reporting and reporting to credit information companies; extension of resolution timelines for stressed assets; and asset classification standstill by excluding the moratorium period of 3 months, etc.by lending institutions. Goldman Sachs Group Inc is predicting a 45% annualised decline in gross domestic product (GDP) in the quarter through June from the previous three months, which it said will result in the economy shrinking 5% for the full fiscal year.
Monetary policy transmission has improved, says RBI governor Shaktikanta Das.
Consequently, the reverse repo rate now stands reduced to 3.35%, while the MSF rate is down to 4.25%. This is his third press conference (the other two being on March 27 and April 17).
Das said the global economy was headed towards a recession because of coronavirus-induced disruptions to supply chains.
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There will be gradual revival of activity and demand by the second half of FY21, said RBI governor.
MPC is of the view that headline inflation in first half of 2020 will be stay intact but by Q3 and Q4 it may fall below the target of 4 percent. He said that the price of vegetables, oilseeds, and milk emerged as pressure points.
Taking stock of the economic scenario of the country, the RBI governor also said GDP growth in 20-21 is estimated to remain in the negative territory with some pickup in growth impulses in the second half of 2021.
However, amidst the uncertainty surrounding the pandemic, agriculture provided a beacon of hope with an increase of 3.7% in food grain production, RBI governor said.
Speaking on the condition of the economy, the governor said that there has been a collapse in demand in both urban and rural demand since March 2020. This, he added, has taken a toll on fiscal revenues.
"After extensive discussions, the MPC voted unanimously for a reduction in policy repo rate and for maintaining the accommodative stance of the monetary policy as long as necessary to revive growth and to mitigate the impact of COVID-19 while ensuring that inflation remains within the target", Das said.