- Subsequent to the Coronavirus induced lockdown which began on March 25, the RBI Governor in his third address today cut the repo rate by 40 basis points to 4%
- Also, the Governor also extended moratorium on all term loans by another 3 months.
- After the lockdown began, RBI had slashed the benchmark interest rate (repo rate) by a massive 75 basis points and also announced a three-month moratorium to be given by banks to provide relief to borrowers whose income has been hit due to the lockdown.
- The loan moratorium has now been extended till August 31 for 6 months.
- Commenting on the Indian Economy, the RBI Governor added that
- Though the lockdown may be lifted by end-May with some restrictions, economic activity even in Q2 may remain subdued due to social distancing measures and the temporary shortage of labour.
- Recovery in economic activity is expected to begin in Q3 and gain momentum in Q4 as supply lines are gradually restored to normalcy and demand gradually revives.
- The inflation outlook is highly uncertain. As supply lines get restored in the coming months with gradual relaxations in the lockdown, the unusual spike in food inflation in April is expected to moderate.
- Further, the forecast of a normal monsoon also portends well for food inflation.
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