Repo rate cut welcome but direction on EMIs ambiguous and half-hearted: Chidambaram on RBI measures

Former Finance Minister P Chidambaram has welcomed the decision of the RBI to cut repo and reverse repo rate while raising concerns over central bank’s step on putting on hold EMI payments on all term loans for three months.

Soon after Reserve Bank of India Governor Shaktikanta Das announced measures that will be taken to offset the coronavirus impact on the Indian economy, P Chidamabarm tweeted, I welcome the RBI’s decision to cut the repo rate and measures to provide more liquidity.

Chidambaram, however, raised concerns over RBI’s decision to put EMIs on hold calling the measure ambiguous and half-hearted. However, the RBI’s direction on deferment of EMI dates is ambiguous and half-hearted. The demand is that all EMI due dates must be automatically deferred, Chidambaram tweeted on Friday.

I welcome the RBI’s decision to cut the repo rate and measures to provide more liquidity.

However, the RBI’s direction on deferment of EMI dates is ambiguous and half-hearted. The demand is that all EMI due dates must be automatically deferred. P. Chidambaram (@PChidambaram_IN) March 27, 2020

The senior Congress leaders said he had suggested that all due dates falling before 30 June may be deferred to 30 June. Borrowers have been made dependent on the bank concerned and will be disappointed, Chidambaram wrote on Twitter.

WHAT HAS RBI JOINED FIGHT AGAINST CORONAVIRUS

The RBI on Friday put on hold EMI payments on all term loans for three months and cut interest rate by steepest in more than 11 years as it joined the government effort to rescue a slowing economy.

The RBI cut repo to 4.4 per cent, the lowest in at least 15 years. Also, it reduced the cash reserve ratio maintained by the banks for the first time in over seven years. CRR for all banks was cut by 100 basis points to release Rs 1.37 lakh crore across banking system.

The reverse repo rate was cut by 90 bps to 4 per cent, creating an asymmetrical corridor.

RBI Governor Shaktikanta Das predicted a big global recession and said India will not be immune. It all depends how India responds to the situation, he said.

The liquidity measures announced include auction of targeted long-term repo operation of 3 year tenor for total amount of Rs 1 lakh crore at floating rate and accommodation under Marginal Standing Facility to be increased from 2 per cent to 3 per cent of Statutory Liquidity Ratio (SLR) with immediate effect till June 30.

Combined, these three measures will make available a total Rs 3,74,000 crore to the country's financial system.

ALSO READ | Here is what Raghuram Rajan thinks RBI can do to soften coronavirus impact on Indian economy

ALSO READ | Coronavirus pandemic and mental health: How we can help people in quarantine

ALSO READ | Coronavirus: From Covid-19 to pandemic, some key terms explained

ALSO WATCH | Chidambaram backs 21-day lockdown, says wage guarantee a must