• R & R – Rate Cuts and Relaxations

MUMBAI, 23 MAY, 2020 (GPN): Mrs. Shanti Ekambaram, Group President – Consumer Banking, Kotak Mahindra Bank shares her perspective on the recent RBI announcement on  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 5^th. 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 31^st2020 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 31^st 2021 and extending “working capital easing” upto March 31^st. 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. ENDS