AGENCIES, Mumbai: The Reserve Bank of India unexpectedly cut its key deposit rate for the second time in three weeks on Friday to discourage banks for parking idle funds with it and push them toward lending to revive the flagging economy amid the coronavirus lockdown.
The RBI cut its reverse repo rate by 25 basis points (bps) to 3.75 per cent with immediate effect, Governor Shaktikanta Das said in a video conference. The rate had already been cut by 90 bps on March 27. The central bank kept its benchmark repo rate unchanged at 4.40 per cent after a 75-bps cut last month.
Since his last address on March 27, Das said that the country’s economic and financial landscape has “deteriorated precipitously” in some areas. “The surplus liquidity in the banking system has risen significantly in the wake of government spending and the various liquidity enhancing measures undertaken by the RBI,” the RBI governor added.
The country’s banks have been extremely wary of lending over the last few quarters as the economy has cooled and those fears have only increased in recent weeks as business activity collapses.