RBI Governor Shaktikanta Das Announced New Measures to Ease Financial Stress

RBI Governor announced Rs. 50,000 crore LTRO.

After India entered into the second phase of a nationwide lockdown on Tuesday to fight against coronavirus, Reserve Bank of India (RBI) Governor Shaktikanta Das today announced new measures to boost liquidity, expand bank credit flow and ease financial stress. 

The Reserve Bank of India (RBI) on Friday freed up more capital for banks to lend, announced a new Rs 50,000 crore targeted long-term repo operation (LTRO 2.0) to address the liquidity stress of shadow banks and microfinance institutions and hinted at the possibility of further rate cuts going forward.

After cutting the benchmark lending rate by 75 bps three weeks ago, the RBI today slashed the reverse repo rate to 25 basis points to 3.75%. The central bank has also asked all banks to not make any dividend payments to shareholders keeping in mind the financial challenges during the COVID-19 pandemic.

The central bank didn’t tinker with the repo rate. Still, the governor said the inflation flight is likely to fall below its target within a month or two, which will create more policy space for it to address better the challenges posed by the COVID-19 outbreak and the lockdown to check its spread. “The space needs to be used effectively and in time,” he said.

RBI Governor Shaktikanta Das press briefing:

Following are the statements of RBI Governor Shikanta Das:

• RBI will monitor developing situations continuously, use all its tools to deal with pandemic fallout, says RBI Governor Shaktikanta Das.

• Loans given by NBFCs to real estate companies to get similar benefits as offered by scheduled commercial banks

• LCR requirement of banks was brought down to 80% from 100%; to be restored in phases by April next year

• Inflation is on a declining trajectory, could recede even further.

• Banks shall not make any dividend payments until further orders.

• NPA classification for banks will exclude the moratorium period

• Economic activities have come to a standstill during the lockdown

•  ?50,000 crores unique finance facility to be provided to financial institutions such as Nabard, Sidbi, NHB

• No change in repo rate which is decided by MPC

• Reverse repo rate slashed by 25 bps to 3.75%.

• New measures aimed at maintaining adequate liquidity in the system, facilitate bank credit flow, ease financial stress.

• TLTRO 2.0 operations of ?50,000 crores will be conducted

• To maintain adequate liquidity in the system, we have decided to take additional measures.

• Redemption pressures faced by some mutual funds have moderated.

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

• COVID-19 impact is not captured in IIP data for Feb.

• ATM operations stood at 91%, no downtime on the internet and mobile banking

• India is expected to post a sharp turnaround in 2021-22

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

• Banks, financial institutions have risen to occasion to ensure normal functioning during the outbreak of the pandemic.

• RBI governor cites developments that bode well for rural demand.

• RBI has been monitoring the situation closely

• The financial market situation has deteriorated in some areas.

• Rupee rises 29 paise to 76.58 against the US dollar in early trade.

• Sensex rose over 1,000 points before RBI's announcement.

• The mission is to do whatever it takes during the COVID-19 pandemic