Impact of Various steps taken by RBI Governor on 27TH March 2020 on

Current economy and Future Economy.

1. RBI Reduces Repo rate reduced by 75 basis points to 4.4%. So, basically Repo rate is the

rate at which Central banks lend money to commercial bank when they are in shortfall of

money. So due to this, the commercial bank will be having more money with them as

they have to pay less amount of interest on the any of the loan they have taken. The

reduction in the rate will lead to economic growth and ensure financial stability.

2. RBI has reduced Reverse repo reduced by 90 basis points to 4%. Reverse Repo rate is the

rate at which RBI take loan from commercial bank when commercial bank has excess of

money with them and in return RBI gives them government bonds as security. So again,

by reducing Reverse repo rate, RBI can borrow more money from commercial bank If

they have currently. Else they also have to pay less amount to them on current borrowed

loans. This will again ensure economic stability and ensure financial stability.

3. RBI has reduced CRR, Cash reserve ratio by 100 basis points to 3%. Cash reserve ratio

means Percentage of Total money Which commercial bank has, need to be kept with

RBI. And same can be given to the bank if needed. So again, this step has been taken as

decrease in CRR will lead to increase in the available deposit money with commercial

bank and they can give more money in form of loan to someone who needs.

 All this step has taken to fight against Novel corona virus 2019. The RBI governor told

that “Tough time never last”. Taking this step, will infuse more money into the market.

Government has already announced to infuse 1.7lakh crore in economy to help poor and

needy and to tackle problems during tough time. By taking the above steps, government
 says that it will infuse more 1.37 lakh crore in the economy. It has also infuse 1.43 crore
through different means.
 So, steps that RBI has taken will have following affects on different perspective in
current as well as future: -
Perspective Currently
Economic Growth Currently Economic growth of
India has slowed down to
around 5% which was
expected 8.2% in 2017.
Economic growth has showed
a steep downfall in last 4
month. Note: - India’s dream
to become $5 trillion
economy from $2.7 trillion
by 2024 cannot be fulfilled
until and unless it grows at
9%-10% after current
situation get over.
Consumer spending Current consumer spending
has been decreased as the
unemployment rate has
reached all time high of 6.1%.
Auto Sector, which makes up
half of India’s manufacturing,
continue to cut the jobs.
Although the food price
inflation has accelerated to
14.1% led by a jump in
vegetable prices and in
medicines. Consumer has
increased online media
consumption on platform such
as Netflix, Amazon prime,
Zoom meeting etc.
Restaurants Currently all the restaurant has
In Future
It will be affected in future
also as all the manufacturing
units are shut down in the
country due to Lockdown.
Although the capital is being
infused in the economy, it will
take time to get back to the
normal economic growth. It
takes time for everything to get
back to normal after such a
deadly Virus.
Future consumer will slowly
increase only if the economy
starts functioning normally and
only if all the works in country
resume. It will take minimum
of 6 month to get back to
normal position. Also,
consumer will only spend on
essential for 2 to 3 month after
the complete elimination of
coronavirus.
In future, people are not going
 been closed and will be closed
until the further order given by month as they will be having
government. They are
suffering a lot as it was there
regular bread-butter.
Banks Currently bank has stop
collecting EMIs and has
stopped interest on the pending bank to recover all the pending
loan. So due to this, banks
have high Non-performing
loan with them. And some of
the banks are also paying more gradually the banks will be
salary to their employees
during this lockdown. (SBI)
Also, all the bank has stopped Pending interest on capital to
the usage of the credit as they
already have shortage of the
money. All working capital
loans sanctioned in the form of
cash credit or overdraft facility
by all lending institutions are
permitted under the 3-month
moratorium.
Stock Market Currently stock market is
experiencing a shrinkage due
to the overall downfall in
economy in India as well as
outside the world. Whosoever
wants to invest in the largecap
and midcap can do it right now
as this is the lowest stage
where stock market is
functioning. SBI card IPO
which was to be listed at 750,
was listed at a discounted price
of 650. So many of them
feared that and sold the share
that day itself when it reached
710. Investing through mutual
funds is safe.
to eat in restaurant for 2to 3
fear of getting infected or
becoming ill. So, Restaurant
owner will have to wait for 3
to 4 month for their business to
resume and get back to
normal.
Future of bank will be difficult
has it will take time for the
EMI, Interest. It will also take
time to normalize all the day to
day transaction and slowly and
having liquidity as compare to
what they have currently.
be recovered after 3 month,
which will decrease banks
liquidity initially.
It is going to increase in the
future as all the company will
be functioning normally and
RBI will already has infused
3.47 lakh crore in the
economy, so the people will be
having liquidity and will spent.
But again, it will take time to
cope up and to get back to
normal position. At least 6
months’ time will be required
to grow. Sensex and nifty, will
grow gradually.
Liquidity

Long run aggregate demand

Increase supply

Low consumer in business consumption

Consumption 70% of aggregate demand

Benefits of Reverse repo rate

Repo rate

How inventory will function

How market will grow

How many

Inelastic investment demand

5 6 month

Inflation figure need to be normal

Npa na vadhi jai

Small business ne, insolvent na thai firm

Auto bov problem ma che, pharmaceutical, grocery, insurance, IT dmart, nestle,

India ma badhi firm moti che, leverage firm puri thai.

Monopoly firm ne businesses ne benefit thai!! Inventory turnover ratio badha na high.

Liquidity trap