MEASURES TAKEN BY RBI GOVERNOR (PRESS CONFERENCE)

Due to COVID-19 pandemic the RBI Committee has come up today to take the preventative steps to offset the slowdown and the successive economic lockdown induced. Fundamentally, the meeting of monetary policy committee having six members took place which focussed and discussed on below highlights:

Bank rates:
 •   Repo rate reduced by 75 basis points to 4.4% (so loans should get cheaper)
 •   Reverse repo rate condensed by 90 bps to 4 percent
 •   Most of the sectors will be affected depending on the intensity, spread and time to contain this virus.

Economic measures:
 •  GDP growth for Q4 2019-20 and FY 2020-21 to be affected (India’s FY 2021 H2 GDP growth forecast of 4.4% is now at risk)
 •  Future outlook uncertain and negative
 •  Aggregate demand may weaken
 •  All measures not to effect credit history

Liquidity measures:
 •  Target long-term repo operation (LTRO). Huge reimbursement in the markets have intensified pressure. RBI will carry out LTRO of up to three year tenor of up to one lac crore at floating rate related to policy repo rate
 •  First auction of Rs. 25,000 crore will be conducted later today i.e., March 27th, 2020
 •  CRR reduced by 100 basis points to 3% for 1 year due to which 1.37 lakh crores to be released into system with effect from March 28th, 2020
 •  Min daily CRR balance reduced from 90% to 80% till 30th June, 2020
 •  SLR to be reduced by 3 percent 
 •  3.74 lakh crore liquidity injected to the system.

Lending measures:
 •  3 month moratorium on payment of instalments of Term Loan or EMIs outstanding as on 1st March, 2020.
 • Interest on WC facilities outstanding as on 1st March, 2020 to be deferred by 3 months (Lending institutions are being allowed for deferment period in case where WC facilities sanctioned in the form of cash credit/ overdraft)
 • The moratorium on term loans and defer interest disbursement on operational capital will not lead to asset classification downgrade as well as no effect on credit of the borrowers
  •  NSFR - deferred to 1st October, 2020
  •  Incremental Capital conservation buffers - deferred from March 30th, 2020 to 30th September, 2020
  •  RBI liquidity measures will give a liquidity of 3.2% of GDP
  •  Bank deposits are completely safe no need to panic to withdraw the same from small private sector banks.
 

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