Daijiworld Media Network - Mumbai (SHP)

Mumbai, May 22: RBI Governor Shaktikanta Das addressed a press conference on Friday at 10 am. He announced a series of measures to ease liquidity pressure in the banking system and cushion the blow of COVID-19. It was for the third time in three months that the RBI Governor was announcing coronavirus-related relief measures in the media.

RBI governor Shaktikanta Das began stating that an off-cycle meeting of the monetary policy committee was undertaken. This was done for the past three days. He further announced a repo cut by 40 bps to 4 per cent.

Das also asserted that the volume of world trade would shrink by 13-32 per cent in 2020. He pointed out that with the fall in rural and urban demand since March 2020, fiscal revenues have suffered majorly.

However, he maintained that the biggest hit caused by the pandemic was the private consumption slump leading to a drop in the consumer durables production by 33 per cent in March 2020.

The RBI governor termed the agriculture and the allied sector as a ray of hope for India.
Addressing the area of food inflation, RBI Governor Shaktikanta Das said that food inflation which had eased from January 2020 peak in February and March, had surged to 8.6 per cent in April. He stressed that the price of vegetables, oilseeds, and milk emerged as pressure points.

The Monetary Policy Committee (MPC) is of the view that headline inflation in the first half of 2020 will stay intact but by Q3 and Q4 it may fall below the target of 4 per cent, said the RBI governor. However, Das stated that there would be a gradual revival in the activity and demand by the second half of FY21. Nevertheless, he added that the GDP will remain in negative this year.

Monetary policy transmission has improved, says RBI governor Shaktikanta Das. He asserted that there was visible progress in passing on a lower rate to borrowers across various business segments.

In order to provide greater flexibility of SIDBI, another 90 days extension for the 90-day term loan facilities will be offered. It would also provide additional liquidity support to the MSME sector, the RBI governor said.

RBI governor Shaktikanta Das says a facility of Rs 15,000 crore line of credit for 90 days for US dollar swap facility will be provided to EXIM Bank. This will have a rollover facility to up to one year.

In another major announcement by Das, the term loan moratorium has been extended till August 31. This makes it a six-month moratorium. He added that the lending institutions are being permitted to restore the margins for working capital to the origin level by March 31, 2021.

Further, the RBI governor declared that the apex financial body was prepared to use all its instruments to address the dynamics of an unknown future. He maintained that although the trials are traumatic, together everyone would triumph.

Among other regulatory measures, RBI has hiked the group exposure limit for banks to 30 per cent from 25 per cent. The central bank set the 25 per cent limit in June 2019 and capped lenders' exposure to a single party at 20 per cent. Considering the current situation due to COVID-19 outbreak, this change has been made said, Shaktikanta Das.

RBI governor Shaktikanta Das said that the Reserve Bank remained in pro-active liquidity management mode, expanding its array of measures, both conventional and unconventional, to augment system-level liquidity as to inject liquidity to the sectors facing funding constraints.

Meanwhile, Das asserted that the MPC realised the macroeconomic impact of the pandemic is turning out to be more severe than initially anticipated, resulting in various sectors of the economy plunging in distress. He added that the impact of the shock has been compounded by the interaction of supply disruptions and demand compression.

He also asserted that the soft global prices of metals and other industrial raw materials are likely to keep input costs low for domestic firms. He added that deficient demand may hold down pressures on core inflation (excluding food and fuel), although persisting supply dislocations impart uncertainty to the near term outlook.

RBI governor Shaktikanta Das said that upside impulses could be unleashed in India if the coronavirus pandemic is contained, and if the social distancing measures are phased out faster.

Though credit growth remains muted, RBI governor Shaktikanta Das said that scheduled commercial banks’ investments in commercial paper, bonds, debentures and shares of corporate bodies in this year so far (up to May 8) increased sharply by Rs 66,757 crore as against a decline of Rs 8,822 crore during the same period last year. He also added that there were net inflows into various schemes of mutual funds in April in contrast to large outflows in March.

Overall in India, RBI governor Shaktikanta Das said that electricity consumption has plunged, while both investment activity and private consumption suffered precipitous declines. He stated that it also mirrored a decline in capital goods production and the large retrenchment in the output of consumer durables and non-durables in March 2020.

For credit-related to exports, RBI governor Shaktikanta Das said that it has been decided to increase the maximum permissible period of pre-shipment and post-shipment export credit sanctioned by banks from the existing one year to 15 months, for disbursements made up to July 31, 2020.

In India, RBI said in its monetary policy statement that the only silver lining was provided by agriculture, with the summer sowing of rice, pulses and oilseeds in the country progressing well, with total area sown under the current kharif season up by 43.5 per cent so far. Further, RBI said that the rabi harvest is promising to be a bumper as reflected in record procurement.