In a video conference, RBI Governor Shaktikanta Das said the central bank's Monetary Policy Committee (MPC) had voted to maintain its "accommodative" stance till growth revives and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target.
Days after finance minister Nirmala Sitharaman announced a Rs 20 lakh crore package for "Aatmanirbhar Bharat", the Reserve Bank of India governor Shaktikanta Das will address a press meeting on Friday 10 AM, triggering speculations that the central bank could extend a moratorium on payment of all term loans.
The EMI payments will restart only once the moratorium time period expires on 31 August.
In his previous addresses post the COIVD-19 outbreak and lockdown, the RBI governor had announced a series of measures to infuse liquidity into the banking system and support the economy on 27 March and 17 April.
This could come as a major relief to people who have to pay EMIs home loans, vehicle loans etc, and are facing pay cuts or job losses in the wake of the COVID-19 lockdown.
If a borrower is unable to pay their EMI for the next three months, the bank will not classify it as a non-performing asset, and neither will it hurt your credit score or credit history.
For borrowers who took loans after October 1, 2019 or switched to the external benchmarking regime, this will automatically translate into an equivalent reduction in their home loan interest rates.
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Apart from this, the repayment schedule and all subsequent due dates, as also the tenure for such loans, were shifted across the board by three months. This makes it a six month moratorium.
Analysts and economists said these measures clearly reflect the apex bank is sensing some big trouble for the economy going forward.
"The off-cycle move may have caught the markets off-guard, but it shouldn't be a total surprise given recent dismal activity indicators", said Prakash Sakpal, an economist at ING Groep NV in Singapore. Das said the combined impact of demand compression and supply disruption will depress economic activity in the first half of the current fiscal.
Painting a slightly optimistic picture, Das said the GDP growth might pick pace in the second half due to a combination of "fiscal, monetary, and administrative measures". "Nonetheless, downside risks to this assessment are significant and contingent upon the containment of the pandemic and quick phasing out of social distancing and lockdown", the Governor added.
The MPC also chose to continue with the accommodative stance as long as it is necessary to revive growth and mitigate the impact of COVID-19 on the economy while ensuring that inflation remains within the target.
On inflation, Das said headline inflation may remain firm in the first half of the current financial year, and ease in the later part of the year. "Beyond doubt, repo rate cuts do uplift the sentiments of home buyers even further".