Below is the Views on RBI Monetary Policy (May 2020) by Shanti Ekambaram, Group President – Consumer Banking, Kotak Mahindra Bank
R & R – Rate Cuts and Relaxations
The Central Bank announced a cut in policy repo rates by 40 bps to 4% and Reverse Repo to 3.35% - ahead of the scheduled policy announcement on June 5th. This was warranted by the steep fall in macro-economic growth data caused by COVID 19.
There has been a steep fall in consumption demand, combined with supply side disruptions. Together, it has led to a sharp decrease in economic growth. RBI expects the second half of fiscal FY2020-21 to be better but the deep negative in the first two quarters is likely to result in negative GDP growth. Both global and domestic growth have been impacted. Inflation in the second half of the year is expected to be lower but supply side disruptions could impact the same.
Other significant announcements included extending the moratorium offered to borrowers to August 31st 2020 i.e. a total of 6 months, providing an interest funded term loan for working capital customers to be paid over this year by March 31st 2021 and extending “working capital easing” upto March 31st. All of them are welcome steps in the right direction.
Coming on the heels of the package announced by the Centre it will help businesses restart. With a gradual lifting of the lockdown, it is now imperative to revive the economy.
Above views are of the author and not of the website kindly read disclaimer