RBI Governor’s Announcement in CORONAPandemic : Reserve Bank Governor Shaktikanta Das today announced a cut in the reverse repo rate from 4% to 3.75%. Addressing the media, Das said on April 14, International Monetary Fund released its global growth projections, revealing that in 2020, the global economy is expected to plunge into the worst recession since ‘The Great Depression’.
“For 2020-21, International Monetary Fund projects sizable reshaped recoveries, close to 9 percentage points for the global GDP. India is expected to post a sharp turnaround & resume its pre-Covid, pre-slowdown trajectory by growing at 7.4% in 2020-21,” Das said.
Period of Resolution Plan for NPAs | Governor Shaktikanta Das says — “Period of resolution plan for NPAs to be extended by 90 days.”
Loans Given by NFBCs to Commercial Real Estate to Get Relief | “Loans given by NBFCs to commercial real estate to get same relief. This is to ease NBFCs and the real estate sector. New measures shall be announced as and when need arises,” says RBI Governor Shaktikanta Das.
LCR Requirement for Banks Brought Down | “The LCR requirement for banks is being brought down to 80% from 100% with immediate effect,” says RBI Governor Shaktikanta Das. “This shall be restored to 90 % by October 2020 and 100 % by April 2021.”
Banks to Not Declare Dividends Until Notice | RBI Governor Shaktikanta Das says that banks shall not declare dividends until further notice.
Period of Resolution Plan for NPAs Extended | Governor Shaktikanta Das says — “Period of resolution plan for NPAs to be extended by 90 days.”
Banks to Maintain Higher Provision | RBI Governor Shaktikanta Das says — “Banks to maintain higher provision at standstill, which can be adjusted later for actual slippages.”
NPA Classification Will Exclude Moratorium Period | NPA classification will exclude the moratorium period. “Targeted Long-Term Repo Operation (TLTRO) auction of Rs 25,000 crore to be conducted today.”
WMA Limit of State Governments Increased | “RBI increases WMA limit of state govts by 60%,”
Reverse Repo Rate Reduced | On April 15, 6.91 crore surplus from the system. To allow banks to use this surplus into economy, reverse repo rate is being reduced by 25 bps from 4% to 3.75% under Liquidity adjustment facility (LAF),” said Governor Shaktikanta Das.
Facilitate Credit Flow | Taking measures to maintain adequate liquidity in the system, Facilitate and incentivize banks credit flow, Ease financial stress & enable formal functioning of markets.
TLTRO 2.0 of Rs 50,000 Crore to Begin With | Targeted long term repo operations to the tune of Rs 50,000, to begin with. Based on our how the market uses it the RBI may scale up the amount.
RBI Governor’s objectives of today’s announcements
1) to maintain adequate liquidity in the system
2) ease financial stress
3) enable formal function of markets
Liquidity Injection by RBI | India’s forex reserves enough for 11.8 months of imports. Well maintained at $476.5 billion. RBI’s liquidity injection has been at 3.2% of GDP since Feb 6-Mar 27, 2020.Kharif Output by 37% | Mission is to do whatever it takes to prevent the curve from steepening. Impact of COVID-19 not captured in IIP print, so don’t get mislead by that data. Kharif output was up by 37%.
Banks Rose to Ocassion | There was no downtime on net or mobile banking. Banks have risen to the occassion.Global Markets Remain Volatile | Global financial markets remain volatile, said RBI Governor Shaktikanta Das. “Crude oil also remains volatile. India is among handful of countries with positive GDP.”Highlight of Current Economic Situation | The macroeconomic situation has suffered in some areas and did better in some, he said. He cited IMF’s forecast of the world’s GDP.Midst of Death, Life Persists | RBI has been proactive and has been monitoring the situation closely, said RBI Governor Shaktikanta Das. He recalled Mahatma Gandhi’s quote — in the midst of death, life persists — and also thanked all those involved in the fight against coronavirus pandemic, especially those in the financial sector.
