RBI ANNOUNCEMENTS AND ITS IMPACT ON BORROWER, DEPOSITIRS AND BUSINESSS STAKEHOLDERS 5 things to know:
The Monetary Policy Committee ( MPC) of the Reserve Bank of India (RBI) in an off-cycle meeting decided to cut the repo rate by 40 basis points (bps) to 4 per cent while the reverse repo rate was reduced simultaneously to 3.35 per cent. Prior to this, the RBI Governor held two pressers on March 27 and April 17, where it cut its repo rate to 4.4 per cent and reverse repo rate to 3.75 per cent. The RBI also decided to extend the moratorium on all term loans by another 3 months to provide relief to borrowers whose income has been hit due to the lockdown. The loan moratorium has now been extended till August 31.

Here is how the new steps by RBI impact the common man including borrowers, depositors and businessmen:

  1. Impact on Deposit Rate and Small Saving rates –With the latest repo rate cut, the deposit rates of the banks may come down further. The same story plays out with small savings schemes whose interest rates are revised on a quarterly basis. Those investing in FDs, especially senior citizens who are mainly dependent on the interest income from these deposits, are likely to see a reduction in their income.
  2. Loans will become Cheaper – The rate cut is expected to reduce EMIs (equated monthly instalments) of borrowers and also make it cheaper to take new loans. Now with the external benchmarking of floating rate loans from October 1, 2019 these loans compared to those linked to MCLR will become cheaper. So, for borrowers looking to take loans, they will get even more attractive rates.
  3. Shorter end of the curve will generate lower yields – Those investors who invest in short duration paper in debt market like overnight fund will see fall in the return. Even the return of liquid funds can fall amidst flush of liquidity in the system.
  4. Moratorium on Loan payment – RBI’s decision to further extend the moratorium on loan for the 3 months will ease the pressure on cash flows of the common people in a time when their income has fallen or is uncertain. However, this move along with the fear of rising NPAs, may put pressure on the banks’ balance sheet and cash flows.
  5. Economic Activity to get a boost – These measures are designed to help businesses stay afloat till the time the situation improves and there is more clarity on the areas in which support is required. Once clarity emerges on the areas that need support and the extent of support required, the government can then provide targeted support. But it is important to ensure that the businesses survive till then.

Going Forward

The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth and mitigate the impact of COVID-19 on the economy. The MPC is of the view that if CPI evolves as per the path there can be scope for further rate cuts. The MPC opined that the macroeconomic impact of the pandemic is turning out to be more severe than initially anticipated and various sectors of the economy are experiencing acute stress.
On economic growth in the current fiscal, the RBI projected negative growth with a pickup in growth impulses in the second half. The MPC said that economic activity other than agriculture is likely to remain depressed in Q1, 2020-21 due to the extended lockdown. Recovery in economic activity is expected to begin in Q3 and gain momentum in Q4 as supply lines are gradually restored to normalcy and demand gradually revives.
Thanks & Regards CA Pankaj Mishra Mishra

By CA. Pankaj Kumar Mishra

CA. Pankaj Kumar Mishra (FCA, LLB, Peer Reviewer, FAFD (Forensic Auditor), M-com, B-Com (CS)) CCIA(ICAI), CCGST(ICAI), CCCAB (ICAI), CCAI(ICAI) Co-opted Member as Special Invitee of ICAI:  Carrier Counselling Committee of the ICAI for the year 2025-26.  Editorial Board of the ICAI for the year 2024-25  Direct Tax Committee of the ICAI for the year 2023-24  Research Committee NIRC of the ICAI for the year 2024-25. Visiting Faculty of:  The National Academy of Direct Taxation (NADT)  The Institute of Chartered Accountant of the India (ICAI)- (MCS)  The Institute of Cost and Management Accountant of India -Direct-Taxes Specially Acknowledged by the Direct Tax committee of ICAI:  for contribution for revising the “Guidance Note on Tax Audit Under section 44AB of The Income Tax Act 1961(Revised 2023). Brief About CA Pankaj Kumar Mishra and his Work Expertise: CA Pankaj Kumar Mishra is a Fellow Chartered Accountant with extensive professional practice in Startup and MSME Advisory Services, covering a comprehensive range of direct and indirect taxation planning, regulatory management, and strategic financial advisory. His core specialization spans tax compliance management, international taxation frameworks. Over the years, he has developed strong expertise in interpreting and applying complex tax provisions, along with managing intricate income-tax proceedings before various wings of the Income Tax Department. A significant part of his professional profile is his active representation before appellate authorities, including  Commissioner of Income Tax (Appeals),  Income Tax Appellate Tribunal (ITAT), and  Other quasi-judicial forums, Including GST Matters and Representation also. He has a proven track record of successfully preparing, presenting, and defending complex tax matters at various appellate stages, demonstrating strong analytical and advocacy skills. His professional journey includes handling matters such as assessments, reassessments, TDS proceedings, search & seizure-related issues, and high-value scrutiny cases. He has also led numerous due diligence assignments, including financial, tax, and technical viability evaluations for mergers, acquisitions, strategic investments, and joint ventures involving both domestic and international stakeholders. also having rich experience in business structuring, foreign exchange laws (including FEMA regulations), and foreign trade policy advisory. In addition to his practice, CA Pankaj Kumar Mishra is well-recognized for his contribution to the profession through knowledge sharing. He has delivered numerous seminars, workshops, and technical sessions at the Northern India Regional Council (NIRC) of ICAI, as well as at other professional forums across Pan-India. His sessions on taxation, startup advisory, and emerging regulatory frameworks have been highly appreciated by participants and peers. Thanks, and Regards CA Pankaj Kumar Mishra

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