Select Page
RBI monetary review: expected to announce debt restructuring and increase moratorium

RBI monetary review: expected to announce debt restructuring and increase moratorium

A day before the Reserve Bank (RBI) monetary policy review, experts said the central bank may avoid a policy rate cut on Thursday, but other measures such as debt restructuring amid the need to revive the economy hit by the Corona virus crisis Can announce. The six-member Monetary Policy Committee (MPC) headed by the Reserve Bank Governor will announce the monetary policy review on August 6. This is the 24th meeting of the MPC. However, experts differ on policy rate reductions. Experts believe that debt restructuring is more important to deal with the impact of Kovid-19 at this time.

Finance Minister Nirmala Sitharaman said last week, our focus is on restructuring. The finance ministry is in talks with the RBI. Apart from this, the central bank can issue guidelines regarding deferment of loan repayment. Its duration is going to end on 31 August. Bank officials are protesting its extension over the possibility of its misuse.

MPC has met twice before its meeting

With the rapidly changing macroeconomic environment and weakening growth scenario amid the Kovid-19 crisis, the MPC has met twice before the meeting. The first meeting was held in March and then the second meeting in May 2020. The MPC reduced the policy interest rate of the Reserve Bank by 1.15 points by aggregating the percentage in both meetings. In order to give a boost to economic growth, the overall policy rate has been cut by 2.50 percentage points after February 2019. The central bank has been actively taking steps to reduce the damage to the economy from the lockdown imposed for the epidemic and its prevention.

According to a research report by SBI, banks have reduced the interest rate on new loans by 0.72 per cent. This indicates that the benefit of policy rate reduction was passed on to the customers faster through interest rate reduction. SBI has cut interest on retail loans related to repo by 1.15 points. Shanti Ekambaram, Group President (Consumer Banking), Kotak Mahindra Bank, said that the rate cut has not had much impact in accelerating demand or growth.

Uncertainties still remain

He said that the Kovid-19 crisis is affecting both companies and customers. The uncertainties still remain. Ekambaram said, given the earlier cut in the policy rate and inflation still above six per cent, the MPC may adopt a wait and watch policy and maintain the status quo in August. The government has given the responsibility of keeping the Reserve Bank at 2 per cent with inflation varying by two per cent.

The central bank takes into account the inflation rate based mainly on the consumer price index when considering monetary policy. Inflation based on the Consumer Price Index was 6.09 per cent in June due to higher prices of food items such as meat, cereals and pulses. Experts are of the opinion that the MPC will maintain a soft stance on the monetary policy front in view of the rapidly changing macroeconomic environment.