RBI Financial Review: Will EMI Exemption Continue, RBI Governor to Say 12 o’clock

A day before the Reserve Bank (Monetary Policy Review), experts said the central bank could avoid a policy rate cut on Thursday, but could announce other measures, such as debt restructuring, in the wake of the Corona virus crisis. RBI Governor Shaktikanta Das will announce the decisions at a meeting of the Monetary Policy Committee at a press conference at 12 noon today. This will make it clear whether the discount on EMI will continue. The six-member Monetary Policy Committee (MPC), headed by the Reserve Bank governor, will announce the monetary policy review on August 30. This is the 24th meeting of the MPC. However, experts disagree about the policy reduction. Experts believe that debt restructuring is even more important in countering the effects of Covid-19 at this time.

“Our focus is on restructuring,” Finance Minister Nirmala Sitharaman said last week. The finance ministry is in talks with the RBI. Apart from this, the central bank may issue guidelines for deferment of loan repayment. Its term is set to end on August 31. Bank officials are protesting the extension due to the possibility of its misuse.

The MPC has met twice before the meeting

The MPC has met twice before the Covid-19 crisis to discuss the rapidly changing macroeconomic environment and weak growth. The first meeting was held in March and then the second meeting was held in May 2020. The MPC has reduced the RBI’s policy interest rate by 1.15 points in both the meetings. To boost economic growth, the overall policy rate has declined by 2.50 percent since February 2019. The central bank is actively taking steps to reduce the damage to the economy caused by the epidemic and its ‘lockdown’.

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Banks have slashed interest rates on new loans by 0.72 per cent, according to a research report by SBI. This indicates that the benefits of the policy rate reduction were passed on quickly to customers through interest rate cuts. SBI has slashed interest rates on repo-related retail loans by 1.15 points. Kotak Mahindra Bank, Group (Consumer Banking) President Shanti Ekambaram said the rate cut has not had much of an impact on demand or accelerated growth.

There is still uncertainty

He said the Covid-19 crisis is affecting both companies and customers. There is still uncertainty. Ekambaram said the MPC could adopt a look-ahead policy before the policy rate and inflation still hover above six per cent and maintain stability in August. The government has tasked the Reserve Bank to maintain inflation at 2 per cent, including 2 per cent.

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The central bank takes into account the inflation rate based on the consumer price index when considering monetary policy. Inflation, as measured by the Consumer Price Index (CPI), was 0.09 per cent in June on account of higher prices of meat, cereals and pulses. Experts believe that the MPC will maintain a soft position on the monetary policy front in the face of a rapidly changing macroeconomic environment.

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