New Delhi: A day after finance minister Nirmala Sitharaman announced a bailout package of Rs 1.7 Lakh crore for the poorest of poor, the Reserve Bank of India announced relief measures for the finance sector, including the EMI-payers. “I am hopeful. The banking sector in India is stable. It is better than what it was after the 2008 global slowdown. This too shall pass,” Governor Shaktikanta Das said.
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Here are the key takeaways:
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1. All commercial banks, including regional, rural banks, small finance banks and local banks, co-operative banks, all-India financial institutions and NBFCs are now permitted to allow a moratorium of three months on the payment of installments in respect of all term loans outstanding as on March 1, 2020. Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, may be shifted across the board by three months.
2. The policy repo rate under the liquidity adjustment facility (LAF) has been reduced by 75 basis points to 4.40 per cent from 5.15 per cent with immediate effect.
3. The reverse repo rate has been reduced by 90 basis points to 4.0 per cent.
4. Global economic activity has come to a near standstill as COVID-19-related lockdowns and social distancing are imposed. Expectations of a shallow recovery in 2020 from 2019’s decade-low in global growth have been dashed.
5. Financial markets have become highly volatile from January onwards. Panic sell-offs have resulted in wealth destruction in equity markets across advanced and emerging economies alike.
6. Only the US dollar remains safe haven in a highly uncertain outlook. Japanese yen and gold – the other two safe havens till the
early part of March – have given way to a flight to cash.
7. Most service sector indicators for January and February 2020 moderated or declined. Since then anecdotal evidence suggests that several services such as trade, tourism, airlines, the hospitality sector and construction have been further
adversely impacted by the pandemic. Dislocations in casual and contract
labour would result in losses of activity in other sectors as well.
8. The need of the hour is to do whatever is necessary to shield the domestic economy from the pandemic.
9. Helping banks: It has been decided to reduce the cash reserve ratio (CRR) of all banks by 100 basis points to 3.0 per cent of net demand and time liabilities (NDTL) with effect from the reporting fortnight beginning March 28, 2020. This reduction in the CRR would release primary liquidity of about Rs 1,37,000 crore
uniformly across the banking system in proportion to liabilities of constituents rather than in relation to holdings of excess SLR. This dispensation will be available for a period of one year ending on March 26, 2021.
10. It has been decided to reduce the requirement of minimum daily CRR balance maintenance from 90 per cent to 80 per cent effective from the first day of the reporting fortnight beginning March 28, 2020. This is a one-time dispensation available up to June 26, 2020.
