Reverse repo rate down to 3.75 percent; banks shall be able to lend more: RBI

Where the economy is already facing recession amid the Corona virus hurt, the Reserve Bank of India (RBI) made several important announcements? The announcements include an amount of Rs 50 thousand crore for long term repo operations.

RBI chief Shaktikanta Das also said that apart from this, special financial facility of Rs 50 thousand crore will be given to the institutions like NABARD and SIDBI and National Housing Bank. The aim of all these steps is that there must not be shortage of cash in the market for a long time. RBI says that given more circumstances if needed, more cash can also be added to the system.

The RBI has done the reverse repo rate slashing by 25 basis points, to 3.75 per cent. According to the head of the Reserve Bank, Shaktikant Das, the purpose of this exercise is that banks should use the additional funds they have to lend more and more. The reverse repo rate is the interest rate at which the RBI keeps the money of other banks.

A few days ago, the RBI described the Corona virus crisis as a black shadow going to take in its grip the future. The central bank had said in its monetary policy report that the consequences of announced lockdown will directly affect the country's economy. RBI said that due to Kovid-19 (corona virus disease), production, distribution system, business and tourism have been affected all over the world.

Earlier last month, RBI had announced a major slash in the repo rate by 75 basis points. After this biggest cut in RBI history, the repo rate has come down from 5.15 to 4.40 per cent. The reverse repo rate was also reduced by 90 basis points to four percent, which is now facing another cut of 25 basis points.