Mumbai: The Reserve Bank of India (RBI), India's central bank, Friday massively reduced the key lending rates in response to the Covid-19 outbreak.

Accordingly, the Monetary Policy Committee of the central bank in an unscheduled meet reduced the repo rate, the key interest rate at which the RBI lends short term funds to commercial banks, by 75 basis points to 4.40 percent from 5.15 percent.

Consequently, the reverse repo rate was also reduced by 90 basis points to 4 percent.

Besides, the marginal standing facility (MSF) rate and the Bank Rate stand reduced to 4.65 percent from 5.40 percent.

The apex bank instituted a moratorium on interest payments on term loans for three months. This move is expected to benefit corporates and MSMEs. Even interest on working capital loans have been deferred for three months.

"This decision and its advancement has been warranted by the destructive force of the coronavirus. It is intended to mitigate the negative effects of the virus; revive growth; and above all, preserve financial stability," RBI Governor Shaktikanta Das said.

"We are living through an extraordinary and unprecedented situation. Everything hinges on the depth of the COVID-19 outbreak, its spread and its duration. Clearly, a war effort has to be mounted and is being mounted to combat the virus, involving both conventional and unconventional measures in continuous battle-ready mode. Life in the time of COVID-19 has been one of unprecedented loss and isolation. Yet, it is worthwhile to remember that tough times never last; only tough people and tough institutions do," he said.