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.
FILE PHOTO: Shaktikanta Das, the new Reserve Bank of India Governor, attends a news conference in Mumbai, India, December 12, 2018. REUTERS/Danish Siddiqui/Files/File Photo
Since his last address on March 27, Das said that India’s economic and financial landscape has “deteriorated precipitously” in some areas. “In order to encourage banks to deploy these surplus funds in investments and loans in productive sectors of the economy, it has been decided to reduce the fixed rate reverse repo rate,” he added.
“It is doubtful whether this flow can be stemmed easily. Banks are not lending or investing because they fear that under the current conditions they may be adversely impacted if they employ the money for investments or lending,” said Joseph Thomas, head of research at Emkay Wealth Management.
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