Rate of interest


  • RBI has trimmed repo rate by 115 bps to 4.00 and reverse repo rate by 150 bps to 3.35%. Now the spread will be 40 bps instead of 25 bps earlier. The higher spread is to discourage the SBCs to deposit the surplus amount with RBI and insist them lend more to the industries.
  • In addition, the central bank has decided to reduce the CRR rate by 100 bps to 3%. This will infuse Rs. 1.37 lac crore liquidity into the system. For long term liquidity, the central bank will conduct auction of TLTRO upto 3yr tenor of a size of Rs. 1 lac crore.
  • Further, under MSF facility, banks are allowed to borrow overnight 3% of SLR instead of 2%.
  • All the three measures together will unleash 3.74 lac crore into the system.
  • The central bank is expected to wait and watch how the inflation rate and growth will response to the recent move of 75 bps after the economic crisis.
  • The liquidity in the banking system already stands above Rs. 6 lakh crore hints room for rate cut still exist.
  • Moreover, GDP growth momentum is expected to remain in the negative territory.