Mumbai: The Reserve Bank of India (RBI) has decided to reduce the policy repo rate by 40 basis points from 4.4 per cent to 4 per cent.

“RBI’s Monetary Policy Committee met again from May 20-22. MPC voted to 5:1 majority to reduce the policy repo rate by 40 basis points from 4.4 to 4%,” Mr. Shaktikanta Das said.

Earlier, the RBI governor had announced several measures to ease liquidity pressure in the banking system and to boost the economy from the coronavirus shock, including a sharp 75 basis points rate cut in March.

RBI had also announced a three month moratorium for all term loan repayments between March 1 and May 31.

Mr. Das added, “India’s merchandise exports suffered their worst fall in 30 years. The forex reserves have grown by $9.2 bn in FY21. Also, industrial production shrank by close to 17 per cent in March with manufacturing activity down by 21 per cent. Output of core industries contracted by 6.5 per cent.”

Governor Mr. Das said that India’s gross domestic product (GDP) will see contraction and may well be in negative territory in FY21.

The central bank increased the export credit period to 15 months from 1 year. The bank also extended a Rs 15,000 crore line of credit for SIDBI for 90 days. RBI also extended a line of credit worth Rs 15,000 crore to EXIM Bank.