What is RBI Monetary Policy 2020?
It is the policy formulated by the Reserve Bank of India in 2020 related to money matters of the country. The policy also takes into account the distribution of credit among users as well as the rate of interest on borrowing and lending. Since India is a developing country, the monetary policy is significant in the promotion of economic growth. The monetary policy in India is formulated by the Reserve Bank of India and relates to the monetary matters of the country. The policy involves measures taken to control inflation, regulate supply of money and cost of credit in the economy. The various instruments of monetary policy include variation in bank rates, other interest rates, supply of currency, etc.
On 27th March 2020, RBI has cut the Repo Rate by 75 bps to 4.40% from 5.15% earlier. Reverse Ratio has been cut by 90 bps to 4% and Cash Reverse Ratio (CRR) by 100 bps to 3%. This has been done to mitigate the impact of Covid-19. RBI has also announced that the banks, NBFCs and housing finance companies are permitted to allow their customers a 3 month moratorium in repayment of EMIs. This means that the borrower may not pay any EMI for 3 months subject to bank’s approval. This delay in EMIs will not have any negative impact on credit score.
Relevant Posts
COVID-19 – RBI Regulatory Package
RBI reduces repo rate & reverse repo rate by 75 & 90 basis points
RBI Circulars on Change in Repo/Reverse Repo Rates dated 27.03.2020
Objectives of Recent Monetary Policy of RBI
The main objectives of the recent monetary policy of RBI are as follows:
RBI joins corona virus fight with big-bang rate move, EMIs put on hold. Make no mistake, it is a fight never seen before, Das warned while outlining the risks to Indian economy .
Key announcements made by Reserve Bank of India on March 27, 2020 :
Indicator | Current Rate | Existing Rate | Impact |
CRR | 3% | 4% | Higher the CRR, lower the amount of money banks can lend out or invest. So, when the CRR is higher, lower would be the liquidity and vice versa. It is not necessary that a hike in the CRR would lead to a hike in home loan interest rate. But, as a reduce in rate in the CRR increase the supply of credit, when the RBI reduce the CRR, banks would reduce home loan interest rates if the demand for credit does not fall proportionately. |
SLR | 18.50% | 19.5% | When the SLR is high, banks have less money for commercial operations and hence less money to lend out. When this happens, home loan interest rates often rise. When the SLR is low, similarly, home loan interest rates are likely to fall. |
Repo Rate | 4.40% | 5.15% |
|
Reverse Repo Rate | 4% | 4.9% | The purpose of this measure, relating to reverse repo is to make it relatively unattractive for the banks to passively deposit the funds with the RBI and instead to use these funds to lending to the productive sectors of the economy, |
Marginal Standing Facility Rate | 2% | 3% | Tt should provide comfort to the banking system by allowing it to avail an additional Rs 1.37 lakh crore of liquidity under the LAF window |
Other changes/Information
Frequently Asked Questions
Here are questions on RBI decision related to personal loan / EMI/ creditcard bills answered._
1. My EMI is due soon. Will the payment not be deducted from my account?
2. Is this a waiver of EMIs or a deferment of EMIs?
3. Does the moratorium cover both principal and interest?
4. What kind of loans does the moratorium cover?
5. Does the moratorium cover credit card payments?
6. I have taken a business loan. Can I not pay my EMI?
Beautifully analysed. Good article
Thank you soo much for compliment
Source of information is press release by RBI and bank is bounded by RBI guidelines, hence all necessary action has to take by bank and NBFC too
What is the source of your information?? Did RBI or any BANK mention anywhere that the Borrower have to show that their income is impacted by Covid-19? is that even logical? Who will give me a certificate that my income is impacted?
Please share the source of your information in order to clarify this doubts.