RBI offers Rs 11,772 crore to banks through repo auction

Cornelia Mascio
Marzo 27, 2020

The informal sector, the backbone of the economy, will be hardest hit as economic activity comes to a standstill.

This is a part of the Central Bank's measures to counter the Coronavirus lockdown, which had started off with the RBI governor announcing massive slash in the key repo rate to 4.4%, to revive economic growth. "The reserve repo rate has been reduced by 90 basis points to 4%", Das said.

In a massive decision, the Reserve Bank of India has announced that banks are permitted to allow a 3-month moratorium on payment of instalments of all term loans outstanding on March 1, 2020.

"RBI has taken up several measures to inject substantial liquidity". "Need for all stakeholders to fight against the pandemic and banks should do all they can to keep credit flowing".

To note, Monetary Policy Committee (MPC) of RBI, defied its schedule and held a meeting in wake of the pandemic. It all depends how India responds to the situation, Das said.

Global slowdown could make things hard for India too, despite some help from falling crude prices, he said. Aggregate demand may weaken and ease core inflation further, he said.

The RBI last slashed CRR on Feb 2013 by 25 basis points.

- Accommodation under Marginal Standing Facility to be increased from 2% from SLR to 3% with immediate effect till June 30.

The move was expected as the central bank, in the past few days, has been actively engaging with the market through repo operations to infuse significant liquidity into the system to ensure that the financial system doesn't turn illiquid.

Indian banking system "safe and sound": The Governor also said that the Indian banking system is "safe and sound" and depositors should not resort to panic withdrawal of their deposits. He implored Indians not to worry about their bank deposits. Prime Minister Narendra Modi's government imposed a three-week long nationwide lockdown for its 1.3 billion people, the most far-reaching measure undertaken by any government to check the virus's spread.

Asia's third largest economy has been locked down for three weeks since Wednesday, putting millions of daily wage earners and lakhs of businesses in unprecedented hardship.

"Moratorium on term loan, deferring of interest on working capital will not classify as default, will not impact credit history of the borrower", the RBI said. A relaxation in the NPA classification norms was also sought with a view to helping those who face loss of income.

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