RBI Governor Shaktikanta Das addressed a press briefing today. This was his second briefing since the COVID-19 outbreak. In his previous address on March 27, Das announced several relief measures approved by its Monetary Policy Committee (MPC) to counter the economic slowdown.
RBI Governor thanked Corona Warriors forefront of the battle against COVID-19 and discussed about various relaxation as follows:
Key Takeaways from RBI Governor Shaktikanta Das’ media address
1. Banks not to make any further dividend payout in view of financial difficulties arising from COVID-19.
2. Loans provided by NBFCs to commercial real estate to get some relief. This is to ease NBFCs and the real estate sector. New measures shall be announced as and when the need arises.
3. The LCR requirement of scheduled commercial banks being brought down from 100 per cent to 80 per cent with immediate effect. This shall be restored to 90 per cent by October 2020 and 100 per cent by April 2021.
4. Period of resolution plan for NPAs to be extended by 90 days.
5. Banks to maintain higher provision at standstill, which can be adjusted later for actual slippages.
6. We recognise that COVID-19 has challenged the ability of borrowers to repay. Thus the 90-day MPA norm shall exclude the moratorium period.
7. Cash flow of households and businesses stands affecte
8. Reverse repo rate is being reduced by 25 bps from 4 per cent to 3.75 per cent under Liquidity adjustment facility (LAF).
9. RBI undertook three long-term repo operations (TLTRO) to ease liquidity constraints. The TLTRO option of Rs 25000 crore is to be conducted today (April 17).
10. The services PMI contracted due to a sharp downturn due to the hit to export. The contraction in exports in March is at 34.6 per cent. It is much more serious than during the GFC.
11. Around 25-30 per cent sharp decline in electricity demand due to coronavirus.
12. Automobile production and sale declined sharply in March. Services PMI declined into contraction in Mar’20 due to export business.
13. These are early developments and bode well for rural demand. While the situation more somber in other production sectors the COVID-19 impact is not captured in IIP data.
14. On April 15, the Indian Meteorological Department (IMD) has forecast a normal southwest monsoon. Rainfall expected at 100 per cent of long term average.
15. Pre-monsoon Kharif sowing has been aggressive. Paddy is up by 37 per cent in April vs last year.
16. RBI has injected 3.2 per cent of GDP into the economy to tackle liquidity situation.
17. India expected to show a sharp turnaround post the COVID-19 crisis. India expected to post a sharp turnaround in FY22 with 7.4 per cent growth as per IMF. India expected to post a sharp turnaround in 2021-2022.
18. Global financial markets remain volatile; crude oil prices remain in flux. Crude oil prices remain in a state of flux despite production cuts by OPEC+India is expected to post sharp turnaround by growing at 7.4 per cent in FY22.
19. RBI has injected 3.2 per cent of GDP into the economy to tackle liquidity situation.
20. India is amongst the handful of countries to have positive GDP growth. India among a handful of counties with positive growth this year as per IMF.
21. Macroeconomic situation has deteriorated. IMF says the global economy may plunge into the worst recession since great.
22. Banks and financial institutions have risen to the occasion and provided services- their efforts are praiseworthy. Banks and financial institutions have risen to the occasion and ensured services continue.
23. Deepest appreciation to health workers, police staff and other service providers at the frontline.
24. India is estimated to have the highest growth among G20 countries as per IMF.
25. In this environment, RBI has been very proactive. Almost every second or third day, RBI has been coming out with announcements. Want to convey resolve of RBI and the way forward.
26. Humanity faces a trial of its time with COVID pandemic. Our Mission is to do whatever it takes.
27. Since my last address on March 27, the microeconomics and financial landscape has deteriorated in some areas.
28. Reserve Bank of India has been very proactive. Have been coming out with announcements.
DISCLAIMER– This write-up is based on the understanding and interpretation of the author and the same is not intended to be professional advice.