In April, the Reserve Bank of India hinted at further cuts in interest rates to maintain adequate liquidity in the system and counter the intensification of risks to growth and financial stability brought on by COVID-19. Announcing a raft of liquidity and regulatory easing of steps RBI Governor Shaktikanta Das said that easing of inflationary pressure on the economy and the outlook that it is on a declining trajectory and could fall further “make policy space available to address the intensification of risks to growth and financial stability brought on by COVID-19.”

In a series of other announcements, the RBI also cut reverse repo rate by 25 basis points to 3.75% , making it less attractive for commercial banks to park cash with the central bank. This is second cut in reverse repo rate in just about three weeks.

Earlier on March 27, RBI had slashed the repo rate by 75 basis points to 4.40 per cent from 5.15 per cent to help the economy fight the Covid-19 pandemic. Simultaneously, the reverse repo rate was cut by 90 basis points to 4 per cent from 4.90 per cent to ensure that banks don’t passively park funds with RBI and start lending to the productive sectors of the economy.