RBI reduces Repo Rate by 40 bps to 4.0%

23-May-20

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The Reserve Bank of India has reduced the Repo rate by 40 Basis points to 4 % from 4.40 %.
The lending institutions have been permitted to extend the moratorium (suspension) on term loan instalments by another three months, i.e., from 1st June, 2020 to 31st August, 2020.
This is expected to help borrowers, especially companies, which have halted production and are facing cash flow problems, to get more time to restart their units.
Earlier, the RBI announced the moratorium for a three-month period — 1st March to 25th May.
The RBI has allowed borrowers and banks to convert the interest charges during the moratorium period (from 1st March to 31st August) into a term loan which can be repaid by March 2021.
This is expected to reduce the burden on borrowers who have gone for moratorium.
The group exposure limit of banks has been increased from 25% to 30% of the capital base for a temporary period till 30th June, 2021.
Group exposure limit determines the maximum amount a bank can lend to one business house. Under the existing guidelines on the Large Exposures Framework, the exposure of a bank to a group of connected counterparties should not be higher than 25% of its capital base.
A Rs. 15,000 crore line of credit for a period of 90 days would be extended to the Exim Bank to boost the foreign trade. Export-Import (Exim) Bank is the premier export finance institution of the country.
The maximum permissible period of pre-shipment and post-shipment export credit sanctioned by banks has been increased from the existing one year to 15 months (for loan disbursements made up to 31st July, 2020).