"The MPC voted unanimously for a reduction in the policy repo rate, and for maintaining the accommodative stance of monetary policy as long as necessary to revive growth [and] mitigate the impact of COVID-19, while ensuring that inflation remains within the target", RBI Gov. Shaktikanta Das said in a televised statement.
The central bank set the 25 percent limit in June 2019 and capped lenders' exposure to a single party at 20 percent.
In his previous addresses post the COIVD-19 outbreak and lockdown, the RBI governor had announced a series of measures to infuse liquidity into the banking system and support the economy on 27 March and 17 April.
These include deferment of interest for 3 months on working capital facilities; easing of working capital financing requirements by reducing margins or reassessment of working capital cycle; exemption from being classified as "defaulter" in supervisory reporting and reporting to credit information companies; extension of resolution timelines for stressed assets; and asset classification standstill by excluding the moratorium period of 3 months, etc.by lending institutions. "To this gloomy backdrop, the rate cut combined with the further extension of loan moratoriums by three months up to August 31, 2020, augurs well for the sector", he added.
Das noted that the domestic economic activity has been severely hit in the last few months, with only the agriculture sector providing a ray of hope.
Analysts say the central bank appears deeply concerned about India's growth prospects.
RBI governor Shaktikanta Das says a facility of Rs 15,000 crore line of credit for 90 days for USA dollar swap facility will be provided to EXIM Bank. He also said that while volatility in global markets may have ebbed "but markets have generally been disconnected from developments in the real economy". This will have a rollover facility to upto one year.
The central bank moved up its monetary policy committee meeting, which was scheduled for early June, to make the rate cut.
Headline inflation could stay firm in the first half of 2020 but soften thereafter.
"RBI will continue to be vigilant and will take whatever measures are needed to be taken due to covid pandemic", Das added. The biggest blow was to the private consumption slump with consumer durables production falling 33 percent.
"The end-May 2020 release of NSO [National Statistical Office data] on national income would provide greater clarity, enabling more specific projections of GDP growth in terms of both magnitude and direction", the governor said on Friday. This, he said, has taken a toll on fiscal revenues. He said that the world trade is likely to shrink by 13 to 32 per cent in the first quarter. This was done for past three days.