RBI Joins the Fight Against Covid-19, Announces Key Policies

 

The recent announcements by Reserve Bank of India after the Monetary Policy Committee’s meeting held between March 24-27 would provide a big relief to the individuals and businesses facing a big economic challenge in the wake of the 21-day lockdown announced by the government on March 24, 2020.

These policies directly address the financial stress caused by Covid-19 pandemic, the Reserve Bank of India said in its statement. The policies consist of expanding liquidity, reinforcing monetary transmission, easing financial stress and improving the functioning of markets.

Key highlights:

  • RBI slashes repo rate by 0.75% to 4.40%.
  • The reverse repo rate reduced by 90 basis point to 4%.
  • Banks and other lending entities, including non-banking finance companies and microfinance companies, are permitted to allow borrowers a three-month moratorium on payment of instalments of all term loans outstanding as of March 1, 2020.
  • Auction of targeted long-term repo operations of 3-year tenor for Rs. 1L crore.
  • CRR reduced by 100 basis points releasing Rs. 1,37,000 Cr.
  • Accommodation under Marginal Standing Facility to be increased from 2% Statutory Liquidity Ratio to 3% till June 30, 2020, releasing 1.37L crore.

The liquidity measures combined would make Rs. 3,74,000 Cr. available to India’s financial system.

Indian Prime Minister Narendra Modi expressed his support on the announcements made by RBI governor Shantikanta Das and tweeted “Today @RBI has taken giant steps to safeguard our economy from the impact of the Coronavirus. The announcements will improve liquidity, reduce cost of funds, help middle class and businesses.”

 

Sources:

https://www.bloombergquint.com/business/coronavirus-crisis-rbi-announces-moratorium-on-loans-targeted-liquidity-measures

https://www.businesstoday.in/current/economy-politics/banks-free-to-defer-payment-of-emis-by-3-months-rbi-gives-permission/story/399380.html

https://economictimes.indiatimes.com/news/economy/policy/rbi-joins-coronavirus-fight-rolls-out-big-bang-rate-move/articleshow/74840568.cms

https://www.moneycontrol.com/news/business/economy/rbi-governor-press-conference-live-updates-shaktikanta-das-coronavirus-relief-package-loan-moratorium-emi-repayments-relaxation-bad-loans-rate-cut-5078571.html