RBI reduces reverse repo rate. This was announced by RBI governor in a press release on 17 April , 2020. RBI governor Shaktikanta Das also announces other relief in his press release keeping in view of this covid-18 outbreak in the whole country.
As the country undergoes an extended nationwide lockdown to put a curb on the spread of deadly coronavirus. This remained a big focus today for investors as they hope for a second stimulus package from the central bank after it announced its monetary policy last month amid the economic fallout due to the deadly novel coronavirus. So to give relief to the investors RBI governor announces various relief measures.
Key Highlights of RBI Governor's Statement:
- Banks not to make any further dividend payout in view of financial difficulties arising from COVID-19.
- Loans provided by NBFCs to commercial real estate to get some relief. This is to ease NBFCs and the real estate sector. New measures shall be announced as and when the need arises.
- The LCR requirement of scheduled commercial banks being brought down from 100 per cent to 80 per cent with immediate effect. This shall be restored to 90 per cent by October 2020 and 100 per cent by April 2020.
- Period of resolution plan for NPAs to be extended by 90 days.
- Banks to maintain higher provision at standstill, which can be adjusted later for actual slippages.
- We recognise that COVID-19 has challenged the ability of borrowers to repay. Thus the 90-day MPA norm shall exclude the moratorium period.
- Cashflow of households and businesses stands affected.
- Reverse repo rate is being reduced by 25 bps from 4 per cent to 3.75 per cent under Liquidity adjustment facility (LAF).
- RBI undertook three long-term repo operations (TLTRO) to ease liquidity constraints. The TLTRO option of Rs 25000 crore is to be conducted today (April 17).
- The services PMI contracted due to a sharp downturn due to the hit to export. The contraction in exports in March is at 34.6 per cent. It is much more serious than during the GFC.
- Around 25-30 per cent sharp decline in electricity demand due to coronavirus.
- Automobile production and sale declined sharply in March. Services PMI declined into contraction in Mar'20 due to export business.
- These are early developments and bode well for rural demand. While the situation more sombre in other production sectors the COVID-19 impact is not captured in IIP data.
- Pre-monsoon Kharif sowing has been aggressive. Paddy is up by 37 per cent in April vs last year.
- RBI has injected 3.2 per cent of GDP into the economy to tackle liquidity situation.
- India expected to show a sharp turnaround post the COVID-19 crisis. India expected to post a sharp turnaround in FY22 with 7.4 per cent growth as per IMF. India expected to post a sharp turnaround in 2021-2022.
- Global financial markets remain volatile; crude oil prices remain in flux. Crude oil prices remain in a state of flux despite production cuts by OPEC+India is expected to post sharp turnaround by growing at 7.4 per cent in FY22.
- RBI has injected 3.2 per cent of GDP into the economy to tackle liquidity situation.
- India is amongst the handful of countries to have positive GDP growth. India among a handful of counties with positive growth this year as per IMF.
- Macroeconomic situation has deteriorated. IMF says the global economy may plunge into the worst recession since great.
- Banks and financial institutions have risen to the occasion and provided services- their efforts are praiseworthy. Banks and financial institutions have risen to the occasion and ensured services continue.
- Deepest appreciation to health workers, police staff and other service providers at the frontline.
- India is estimated to have the highest growth among G20 countries as per IMF.
Source. HTTPS://m.rbi.org.in
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