Daijiworld Media Network - Mumbai (SHP)

Mumbai, Mar 27: Amid the glooming economic crisis caused by the coronavirus lockdown, RBI governor Shaktikanta Das addressed the media via a video conference on Friday.

The governor announced that the RBI repo rate would be cut by 75 basis points, to encourage banks to give more to business rather than deposit with RBI. This move is to mitigate the negative effect of COVID-19 on the economy.

The governor also cautioned over the extended impact of coronavirus lockdown across the globe. The prolonged effect will disrupt the supply chain and jeopardise the Indian economy. However, with the fall in crude oil prices, there can be some relief expected.

Das further announced a revised Repo rate, from 5.15 per cent to 4.20 per cent. "We are not giving out inflation and growth projection numbers due to the uncertain conditions," he added.

The RBI governor also said that several economies across the globe will suffer a major blow due to the lockdown. He stressed that tough times were looming in the future and that the world economy could slip into recession and that if precautionary measures were adopted there was a possibility to overcome the crisis.

The RBI on Friday cut LAF (Liquidity Adjustment Facility) by 90 bps to 4 per cent. The governor also announced deduction in Reverse repo-rate by 90 bps to 4 per cent.

He pointed out that finance was the primary source of keeping a country running smoothly and that the 'paramount objective' was to keep finance flowing, especially at a time when the financial activity was under severe stress.

The MPC (Monetary Policy Committee) stated that the global economy has come to a standstill because of the pandemic. "Expectations of a shallow recovery in 2020 from 2019's decade low in global growth have been dashed," said the RBI chief.

Das also announced the reduction of the Cash Reserve Ratio (CRR) for all banks by 100 basis points to 3 per cent of net demand and time liabilities with effect from the fortnight beginning of March 28 for a period of 1 year.

The RBI chief said that measures will result in total liquidity injection of Rs 3.74 lac crore to the system.

The RBI chief also announced that all banks, lending institutions may allow a three-month moratorium on all loans. He added that lending companies, banks are allowed tom defer interest on working capital repayments by three months.

Banks may also reassess working capital cycle and will not be treated as non-performing assets, he said. Mitigating debt servicing burden to prevent transmission of financial stress to the real economy, provide relief to borrowers said RBI chief Shaktikanta Das.

The 3-month moratorium mentioned by the governor has been decided on payment of installments of loans outstanding on 1 March 2020.

Offshore Rupee NDF Market has been growing rapidly, noted the RBI. Net Stable Funding Ratio (NSFR) which was earlier supposed to be introduced from April 1 is now deferred to October.

On a positive note, the RBI governor assured citizens that the Indian banking system is safe and sound. "In recent past COVID-19 related volatility in the stock market has impacted share prices of banks as well resulting in some panic withdrawal of deposits from a few private sector banks." he maintained.

He assured people that their funds were safe and advised the citizens to not panic withdraw their deposits from banks.

Towards the end of the conference, the RBI announced that they have injected liquidity of Rs 2.8 lac crore via various instruments equal to 1.4 per cent of GDP. "Along with today's measures liquidity measures equal to 3.2% of GDP. RBI will take continuous measures to ensure liquidity in the system," Shaktikanta Das stated in his address.

RBI Governor's Conference Highlights:

• Monetary Policy Committee met from March 24 to March 27
• Time for the central bank to unveil a comprehensive package with force multipliers 1) Measures to increase liquidity 2) Steps to relocate monitary transmission 3) Efforts to ease financial repayments 4) Efforts to stabilize markets
• Repo rate from 4.4% from 5.15%
• Reverse repo-rate reduced by 90 basis points to 4%
• Cash reserve ratio of all banks reduced by 100 basis points
• Central bank cuts Liquidity Adjustment Facility (LAF) by 90 bps to 4%
• Longer impact of COVID-19 will bring global economy to standstill
• Total liquidity measures worth Rs 3,74,000 crore
• Central bank injected Rs 2.8 lac crore into the system since last February policy
• Tough times never last, only tough people and tough institutions do
• With supply chain disrupted, world economy may slip into a recession
• Reserve Bank will carry out a long-term repo rate outlook for up to 3 years amounting to Rs 1 lac crore. The first tranche of Rs 25,000 crore will be done on March 27.
• Financial stability imperative, will continue to keep finance flowing into the economy
• Banks allowed to offer 3-month moratorium on all loans for a period of three months
• Economic outlook globally is uncertain and obviously negative
• Offshore INR NDF market has been growing rapidly. Indian banks are not allowed to participate in the market currently.
• We have decided to defer the NSFR to October 2020
• Total liquidity measures taken amount to Rs 3,74,000 crore
• Indian banks are safe and there is no need to resort to panic withdrawals