RBI's surprise announcement : 10 things to know

Reserve Bank of India (RBI) Governor Shaktikanta Das slashed the key lending rate by 75 basis points (0.75 percentage point) in an emergency move on Friday, to counter the economic fallout from the rapid spread of the deadly coronavirus pandemic. The move came as the country entered the third day of nationwide lockdown to curb the spread of the virus, following an unscheduled meeting of its Monetary Policy Committee, which was originally scheduled to conduct a bi-monthly review early next month. Four out of the six members of the Monetary Policy Committee voted in favour of the move. "The economic outlook globally is uncertain and obviously negative... Financial stability is the topmost priority of the RBI in this crisis," said Shaktikanta Das.

Here are 10 things to know about the RBI's announcement:

1.   The magnitude of the cut in repo rate - the key interest rate at which the RBI lends short-term funds to commercial banks - was the highest under Shaktikanta Das so far. The largest cut he had delivered was of 35 basis points in August last year.

2.  The RBI Governor also announced a cut of 100 basis points in the cash reserve ratio(CRR) for a period of one year, a step he said will ensure sufficient liquidity in the system. CRR or cash reserve ratio is the amount of cash commercial banks have to mandatorily park with the Reserve Bank of India. "This would release liquidity worth Rs 1,37,000 crore within banks," the RBI Governor said.

3.  It also permitted all commercial banks and lending institutions to allow a three-month moratorium on all loans, in view of the ongoing lockdown to protect the 130 crore people in the country from the deadly virus. "Banks should do all they can to keep credit flowing," Mr Das added. 

4.  The priority is to undertake "strong and purposeful action" to protect the economy, and there is a need for all stakeholders to fight against the coronavirus pandemic, Mr Das said. 

5.  The surprise moves came as India entered the third day of a 21-day countrywide lockdown to curb the rapid spread of the coronavirus pandemic. The RBI Governor-headed Monetary Policy Committee was originally scheduled to meet early next month.

6.  "Indian banking system is safe and sound... In spite of the challenging environment, I remain optimistic," the RBI Governor said. 

7.   The RBI has already infused Rs 2.7 lakh crore into the country's financial system since the February policy meeting, the Governor said. The central bank's overall liquidity injection stands at 3.2 per cent of GDP, he said.

8.  He said the RBI will continue to be vigilant and take "whatever steps necessary" to mitigate the impact of the coronavirus on the economy.

9.   On Thursday, Finance Minister Nirmala Sitharaman had announced a Rs 1.7 lakh-crore fiscal package to support the poor through direct cash transfers and food security measures, without giving details on how the programme will be funded.

10. India is staring at the worst annual rate of gross domestic product (GDP) expansion recorded since the 2008-09 global financial crisis, and many economists have anticipated a further blow to the economy thanks to the COVID-19 outbreak.