The Reserve Bank of India keeps interest rates unchanged at record lows as it reiterated its commitment to keep its monetary policy accommodative, to help the economy recover from the world’s worst outbreak of COVID-19 infections.
RBI expanded its version of quantitative easing to keep borrowing costs anchored. It will buy an additional Rs 1.2 lakh crore of bonds under the Government Securities Acquisition Programme (G-SAP) 2.0 in the second quarter. It decided to retain an accommodative policy stance “as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy”, signaling there is still room to cut rates further.
In April, RBI committed to buying Rs 1 lakh crore worth of government bonds from the market between April and May under G-SAP 1.0. Under G-SAP 1.0, RBI will purchase government securities worth Rs 40,000 crore this month. Among the other measures that were announced, RBI allowed banks to borrow as much as Rs 15,000 crore for lending to COVID-hit sectors such as hotels and tourism industry.
Further, an additional Rs 16,000 crore funding has been earmarked for SIDBI for lending to MSMEs, directly or indirectly over and above the quantum of Rs 50,000 crore that was set aside for government financial institutions in the April policy.
In order to provide further relief to the businesses hit by COVID 2.0, the newly announced restructuring window has been extended for all entities with outstanding credit of Rs 50 crore. RBI had slashed the repo rate by a total of 115 basis points (bps) since March 2020, to soften the blow from the pandemic.
