India's Central Bank Cuts Key Interest Rate To 4% For 2nd Time In 2020 To Offset Pandemic

The Reserve Bank of India (RBI) on Friday cut the key interest rate to 4 percent, a drop by 40 basis points, for the second time in 2020 in an effort to minimize the negative economic consequences caused by the nationwide coronavirus-related lockdown, according to the regulator's press release

MOSCOW (UrduPoint News / Sputnik - 22nd May, 2020) The Reserve Bank of India (RBI) on Friday cut the key interest rate to 4 percent, a drop by 40 basis points, for the second time in 2020 in an effort to minimize the negative economic consequences caused by the nationwide coronavirus-related lockdown, according to the regulator's press release.

The decision was made at an extraordinary meeting of the monetary policy committee (MPC) instead of the scheduled meeting from June 3-5. The meeting was held following a recent release of macroeconomic data, which for the first time revealed the scope of the damage wrought by COVID-19.

"After extensive discussions, the MPC voted unanimously for a reduction in the policy repo rate and for maintaining the accommodative stance of monetary policy as long as necessary to revive growth, mitigate the impact of COVID-19, while ensuring that inflation remains within the target. On the quantum of reduction, the MPC voted with a 5-1 majority to reduce the policy rate by 40 basis points from 4.4 per cent to 4.0 per cent," RBI Governor Shaktikanta Das said, as quoted in the press release.

According to the regulator, the reverse repo rate stands at 3.35 percent, down from 3.75 percent.

In March, the RBI already reduced the interest rate to 4.4 percent from 5.15 percent to ease the financing burden caused by the pandemic.

According to media reports, India currently has the lowest benchmark rate, the interest the central bank charges on lending to commercial banks, since March 2010.

Indian Prime Minister Narendra Modi has previously promised a support package worth 20 trillion rupees ($266 billion) to offset the disruption caused by the ongoing COVID-19 pandemic.

Earlier in May, the authorities extended the COVID-19 restrictions that have been in place since March 25 yet again, with the lockdown now scheduled to expire on May 31. The Indian government has also divided the country into red, orange and green zones depending on the epidemiological situation. In the green zones, where the infection rate is believed to be low, public transport and certain businesses are allowed to operate.