RBI Governor Shaktikanta Das: RBI monitoring situation, will use all instruments to address COVID-19 challenge

In a major relief for small and medium-sized financial organisations including NBFCs and MFIs, Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced a slew of measures to induce liquidity in the market, which has been impacted in the wake of the COVID-19 pandemic.

RBI Governor Shaktikanta Das

While addressing the media RBI governor said that economic activities have come to a standstill during the lockdown. The governor mentioned that inflation is on a declining trajectory and could even reduce further.

The central bank has announced various steps like long-term repo operation (TLTRO) to boost liquidity in the system. It has announced the TLTRO 2.0 operations of ₹50,000 crores to be conducted. 50% of the funds in TLTRO 2,0 is for small and medium-sized NBFCs. The central bank estimated the GDP growth at 7.4 percent in the next financial year 2021-22.

The governor said, “Despite the lockdown, sowing has begun and the IMD predicts normal monsoon this year. Hence, India is set to post a sharp economic turnaround. “India’s growth projection has been the highest among G20 nations.”

The speech also mentioned that ATM usage has been at 90 percent around the country. Below are the key measures are taken by the governor on Friday to boost liquidity in the system.

• Rs 50,000 crore special finance for financial institutions including Nabard, Sidbi, NHB to help them with refinancing.
• Reverse repo rate cut by 25 bps to 3.75 percent.
• Loans by NBFCs to real estate companies to get similar benefits as given by scheduled commercial banks.
• Liquidity coverage ratio (LCR) requirement of banks brought down to 80 percent from 100 percent; to be restored in phases by April next year
• Banks shall not make any dividend payments until further orders
• NPA classification for banks will exclude the moratorium period, 90-day NPA norm to exclude lockdown period
• NBFCs allowed to grant relaxed NPA classification to their borrowers
• The announcement by RBI today focuses on four key areas as it looks to ease pressure on banks and businesses in the country. 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.