Central government’s response to the COVID-19 pandemic (May 11 – May 22, 2020)
Distilled Policy Brief
- The RBI Monetary Policy Committee reduced the policy repo rate by 40 bps to 4%, lowered the reverse repo rate to 3.35%, and reduced the Cash Reserve Ratio (CRR) by 100 basis points to 3%.
- The Cabinet approved additional funding of Rs three lakh crore under the Emergency Credit Line Guarantee Scheme for eligible MSMEs and MUDRA borrowers, backed by 100% guarantee coverage from the National Credit Guarantee Trustee Company Limited.
🎯 Prelims High-Yield Examination Points
Under the Aatma Nirbhar Bharat Abhiyaan, the Emergency Credit Line Guarantee Scheme provided additional funding with 100% guarantee coverage by the National Credit Guarantee Trustee Company Limited. The RBI reduced the Cash Reserve Ratio (CRR) to 3% and the policy repo rate to 4% in May 2020.
⚖️ Mains Analytical & Syllabus Linkages
Examine the role of large fiscal stimulus packages like the Aatma Nirbhar Bharat Abhiyaan and monetary policy interventions by the RBI in mitigating economic distress during health emergencies.
🎯 UPSC Prelims Practice Drill
With reference to the economic measures undertaken by the central government and the Reserve Bank of India (RBI) during May 2020, consider the following statements: 1. The Monetary Policy Committee reduced the policy repo rate and lowered the Cash Reserve Ratio (CRR) to 3%. 2. The Cabinet approved additional funding under the Emergency Credit Line Guarantee Scheme for eligible MSMEs and MUDRA borrowers, with 100% guarantee coverage provided by the National Credit Guarantee Trustee Company Limited. Which of the statements given above is/are correct?
- [A] 1 only
- [B] 2 only
- [C] Both 1 and 2
- [D] Neither 1 nor 2
▶ Reveal Official Answer & Analytical Explanation
Both statements are correct. The RBI Monetary Policy Committee reduced the policy repo rate, lowered the reverse repo rate, and reduced the Cash Reserve Ratio (CRR) by 100 basis points to 3%. Furthermore, the Cabinet approved additional funding of Rs three lakh crore under the Emergency Credit Line Guarantee Scheme for eligible MSMEs and MUDRA borrowers, backed by a 100% guarantee coverage from the National Credit Guarantee Trustee Company Limited.
🏛️ Historical Twin PYQ Anchor (2021)
Consider the following statements regarding the "National Clean Air Programme (NCAP)": 1. It is implemented by the Ministry of Environment, Forest and Climate Change. 2. Central Pollution Control Board acts as the sole regulatory executive body.