RBI: Relief measures against economic crisis

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RBI: Relief measures against economic crisis

Here are the 10 points

Friday, 17th April 2020

RBI Governor Shaktikanta Das has given 10 fresh measures to help small as well as medium-sized financial systems to recover from the blow given by Covid-19 pandemic. Shaktikanta Das announced other relief measures along with announcing fresh TLTRO 2.0 operations of Rs.50,000 crore in order to relieve the financial stress due to the outbreak of Covid-19.

The 10 points are as follows:


  1. RBI to conduct another round of targeted long term repo operations (TLTRO) or TLTRO 2.0 for Rs.50,000 crore initially. This way, NBFCs and MFIs will be refinanced and a smooth cash flow will be maintained in small as well as medium enterprises.
  2. He said, “It has been decided to provide special refinance facilities for an amount of Rs 50,000 crores to National Bank for Agriculture and Rural Development (NABARD), Small Industries Development Bank of India (SIDBI), and National Housing Bank (NHB) to enable them to meet sectoral credit needs”, so that small and medium finance institutions can lend money to business without obstacles.
  3. The first round of TLTRO operations were conducted mostly to help PSUs and big corporations, whereas the second round was organized to help small and medium sized ones catering to MSMEs. Now, it is the time to aid smaller finance organizations for easy cash flow.
  4. RBI might boost the amount further if need be. RBI governor indicated that, “at least 50 per cent of the amount availed by the aforementioned banks must go to small-sized NBFCs and MFIs”.
  5. The fresh move is done in order to help retain liquidity in financial systems.
  6. He stated, “RBI undertook three long-term repo operations to help ease the liquidity situation”. He added, “A TLTRO operation of Rs 25,000 crore will be conducted today itself. Financial conditions have eased due to these auctions and added that it has also helped boost activities in the corporate bond market”.
  7. Das said, “RBI is working to maintain adequate liquidity in the system, facilitating and incentivizing healthy cash flow from banks, easing the overall financial stress and enabling formal working of markets”.
  8. Many other measures to relieve economic strain have punctured the economy. 90-day NPA rule will not hold good now to the moratorium granted on the loans by banks. Das stated, “"Loans given by NBFCs to real estate companies to get similar benefit as given by scheduled commercial banks”. RBI decided, “Liquidity Coverage Ratio (LCR) requirement for scheduled commercial banks (SCB) will be brought down from 100 per cent to 80 per cent with immediate effect. This will help banks maintain sufficient high-quality liquid assets in the wake of the economic crisis”.
  9. Fixed reserve repo rate is about to be reduced under LAF by 25 basis points from 4 to 3.75%, immediately,  Das said, as inflation might drop below its target in a few months. He added, “Banks do not have to make any further dividend payout in view of the financial difficulties due to Covid-19”.
  10. Das expressed his gratitude to the bankers and the others working on the frontline to tackle lockdown problems. He assured hope that our nation will have a turning point and will grow at 7.4% in the coming year, citing International Monetary Fund projection. India is equipped with reserves to fight the economic crisis due to corona virus, he asserted.


Source: indiatoday

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