RBI Announces Rs 1 Lakh Crore Repos to Aid Monetary Transmission

New Delhi, February 6, 2020:

The Reserve Bank of India (RBI) has announced that it will conduct new one-year and three-year repos worth Rs 1 lakh crore in order to ensure better monetary policy transmission.

RBI Governor Shaktikanta Das on Thursday informed about the decision at a press conference. He said, “It is an effort to ensure better monetary policy transmission. It will enable banks to reduce their lending rates.”

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In the sixth bi-monthly policy, the RBI announced its plan of the new tenors of appropriate sizes for a total amount of Rs 1 lakh crore at the policy repo rate from the fortnight, beginning February 15.

It may be mentioned here that Repo rate is the rate at which the RBI lends money to commercial banks in the event of any shortfall of funds. It is used by monetary authorities to control inflation.

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The RBI Governor also announced a slew of initiatives owing to the current state of economy in the country. Das observed that the current slowdown in the economy was driven by liquidity issues, slow credit off-take, and weak rural demand.

In order to give a boost to digital banking and enable regional rural banks (RRBs) to provide cost effective and user-friendly solutions to their customers, RRBs will be acting as merchant acquiring banks, using Aadhaar Pay, BHIM app and POS terminals.

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A self-regulatory organisation (SRO) will be set up for digital payment system by April 2020 to further boost security, customer protection and pricing, among others.

The Gross Domestic Product (GDP) has been projected at 6 percent for Financial Year 2020-21. While speaking on the lines of the deadly Coronavirus in China and its impact on business, the RBI governor said that it would affect the tourist arrivals and global trade.

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