RBI Measures to counter COVID-19 impact: Repo, CRR Cut, Banks, NBFC’s to offer 3 month Mratorium on Loans

The RBI Governor neted that the current economic outlook is highly dependent on the duration, intensity tht there is a high possibility that large parts of the world will slip into recession.

Further, Das stated that shallow recovery is expected in 2020 after a decade low’s in global growth in 2019. The monetary Policy Committee has reported that global stand-still due to the various lockdowns imposed to combat COVID-19 spread and implement social distancing.

RBI Governor’s media addess: Key Highlights

The repo rate has been reduced by 75 basis points from 5.15 percent to 4.4 percent.

The reverse repo rate reduced by 90 basis point to 4 percent to incentivise bans to lend.

CRR: Cash Reserve Ratio of all banks reduced by 100 basis points to 3 percent of net demand and time liabilities with effect for one year from March 28. CRR has been cut to unlock liquidity.

Moratorium on term loans: All th elending insititution have been allowed a moratorium of 3 months.

Demand: Aggregate demand may weaken. GDP growth: the GDP growth of th elast quarter of fiscal year 2019-20 and FY 20-21 is likely to be affected.

Liquidity: 3.74 lakh crore Liquidity injected

Global Economic Outlook

The RBI Governor noted that the global economic outlook is highly uncertain and negative as many nations are struggling to contain the virus. Serveral nations have imposed lockdown to deal with the crisis.

Indian Banking System

The RBI Governor has assured that the Indian Banking System is safe and sound and there is no need for the depositors of private and commercial banks to worry about the safety of their deposits. He said that COVID-19 related volatility impacted the shareprices of the banks in the recent past, resulting in panic withrawal of deposits from a few private sector banks. However, this time there is no need to worry and indulge in such withdrawals.

Background

The RBI Governor’s address comes just a day after Union finance minister Nirmala Sitharaman unveiled the new economic package to deal with the coronavirus impact on the economy and provide relief to the poor and most vulnerable. The measures wouth about Rs. 1.70 lakh crore is expected to reduce the impact of the outbreak in the economy and on people.

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