Reserve Bank of India Cuts Down On Reverse Repo Rate

Reserve Bank Providing relaxation to lenders, the Reserve Bank of India, on Friday, decided to freeze dividend payments by banks for the financial year 2019-20. Addressing a speech being broadcasted over the television, RBI Governor Shaktikanta Das said, “It is imperative that banks conserve capital to retain their capacity to support the economy and absorb losses in an environment of heightened uncertainty. It has, therefore, been decided that in view of the COVID-19-related economic shock, scheduled commercial banks and cooperative banks shall not make any further dividend payouts from profits pertaining to the financial year ended March 31, 2020, until further instructions.”

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As reported by the Financial Express, the dividend payment halt, announced by the central bank will be reviewed during the quarter that is to end on September 30.

The announcement to halt dividend payments by Reserve Bank the lenders came along with a slew of other measures announced by the central bank that included cutting the reverse repo rate to 3.75% from 4% in a bid to encourage the banks to spur lending to help the economy cope with the impact of the coronavirus lockdown. There is enough liquidity available in the system, stated Das, highlighting that the RBI absorbed ₹6.9 lakh crore from the banks on April 15 alone.

Das also asked banks to make a higher 10% provision for all accounts that are under a standstill under the loan moratorium. It was also announced that Bank the accounts that are provided with the moratorium will see an asset classification standstill from March 1, 2020, to May 31, 2020.

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On the inflation front, CPI-based inflation has declined in the month of March and it is expected to recede even further. In his address,Reserve of India governor Das highlighted that in the coming quarters, India would be growing at the rate of 1.9% which will be the highest among the G-20 nations.

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