If CPI inflation falls below 4%, it could allow another 50bps reduction in policy rate The Reserve Bank of India (RBI) has announced a new set of measures to mitigate the impact of the covid-19 pandemic on the economy.
Incentivizing banks to lend, rather than depositing excess liquidity with the RBI, the reverse repo rate has been further reduced by 25 basis points to 3.75%.
Banks deposited ₹4.9 trillion net surplus liquidity with RBI on 16 April. Lower rates incentivize banks to lend rather than keep deposits with RBI.
Liquidity injections of ₹1 trillion under Targeted Long-Term Repo Operations (TLTROs), part of RBI’s earlier ₹3.74-trillion liquidity enhancing measures for banks, were largely accessed by public sector enterprises and