The RBI governor Shaktikanta Das has announced a cut in the repo rate by 40 basis points to 4 per cent, while the reverse repo rate was simultaneously reduced to 3.35 per cent. Das said that there is a collapse in demand in both urban and rural areas since March. This, he added, has taken a toll on fiscal revenues. The governor said that the biggest blow from COVID-19 came from a slump in the private consumption with consumer durables production slipping by 33 percent in the month of March.
Speaking about the food inflation, the RBI governor said that the food inflation which had eased from the January peak in February and March has now surged to 8.6 percent in April. He said that the price of vegetables, oilseeds, and milk emerged as pressure points. The three-month moratorium on payment of instalments on term loans to banks, non-bank financial institutions (NBFCs), including housing finance companies, and other financial institutions is being extended by another three months.
The central bank had allowed financial institutions a three-month moratorium on payment of instalments on term loans on March 27. The moratorium allowed by RBI will help borrowers in easing the burden on their savings and avoid turning defaulters.