Reverse Repo Rate: Reserve Bank of India (RBI) governor Shaktikanta Das on Friday addressed the media amid the ongoing coronavirus crisis. This comes just a day after Prime Minister Narendra Modi met Union finance minister Nirmala Sitharaman to discuss contours of a proposed stimulus package to kick-start India’s stalled economy.
Here are the key points from RBI governor‘s address:

Under liquidity adjustment facility (LAF), reverse repo rate (rate at which RBI borrows funds from banks) reduced by 25 basis points (bps) to 3.75%; repo rate — rate at which RBI lends money to banks — unchanged (4.40%) as the decision is taken by the MPC (Monetary Policy Committee).

The central bank today took several steps to improve liquidity for non-banking finance companies as they were finding it hard to raise funds. RBI Governor Shaktikanta Das announced the launch of the second installment of TLTRO — TLTRO 2.0 — for easing credit to NBFCs.

RBI’s Rs 50,000 crore liquidity support: Rs 25,000 crore for NABARD (National Bank for Agriculture and Rural Development); Rs 15,000 crore for Sidbi (Small Industries Development Bank of India); Rs 10,000 crore for NHB (National Housing Bank)

90-day NPA (non-performing asset) norm not to apply on moratorium granted on existing loans by banks

LCR (liquidity coverage ratio) requirement of banks brought down to 80% from 100%; to be restored in phases by April next year

Banks not to make any further dividend payout in view of financial difficulties arising from Covid-19

Covid-19: RBI has been very proactive and monitoring the situation very closely; it will monitor evolving situation continuously and use all its tool to deal with pandemic fallout

On IMF projection: India is expected to post sharp turnaround in 2021-22

IMF projection of 1.9% GDP growth for India is highest in G20

Impact of Covid-19 not captured in IIP (index of industrial production) data for February

Automobile production, sales declined sharply in March; electricity demand has fallen sharply

Contraction in exports in March at 34.6% much more severe than global financial crisis of 2008-09

No downtime of internet or mobile banking during lockdown; banking operations normal,

Surplus liquidity in banking system has increased substantially as result of central bank actions

Frontline workers (doctors/nurses/social) have shown a great work

This is the RBI governor’s second press briefing since the COVID-19 outbreak. In his previous address on March 27, he had announced a rate cut of 75 bps.

The extension of the lockdown till May 3 has triggered fresh demands for a stimulus as companies are finding it difficult to pay salaries and meet other costs because of the loss of a large part of their revenue.

Das is currently in the processing of announcing various steps to mitigate the impact of COVID-19 on markets. He said the measures have four objectives in mind. These are aimed to maintain adequate liquidity in the system and its constituents, to facilitate and incentivize bank credit flows, to de-stress and enable the performance of markets.

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