In what came called as a liquidity boosting measures, Reserve Bank of India(RBI) on Friday has announced an extension of EMI moratorium on all term loans by three months — June, July, and August. Adding to which, the RBI panel unexpectedly cut the repo rate by 40 basis points to 4 per cent and the reverse repo rate by 40 basis points to 3.35 per cent.
This will help borrowers, especially corporates which have halted production and are facing cash flow problems, to get more time to stabilize their operations and restart their units. All borrowers, including home loan, term loans and credit card outstandings, will get the benefit of the moratorium.
Announcing that the decision would aid economic recover by fuelling demand that had been severely hit by covid-19 outbreak, the central bank of India hinted upon taking down EMIs on home, personal & term loan rates. Savers and pensioners will see their returns coming down. However, RBI Governor Shaktikanta Das did not mention any specific figure on the growth rate.
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.