Amid Covid-19 Crisis, RBI Injects Liquidity; Cuts Reverse Repo Rate By 25 BPS To 3.75%

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 crore to be conducted.

New Delhi: In a major relief for businesses, Reserve Bank of India (RBI) Governor Shaktikanta Das has announced a slew of measures to induce liquidity in the market, which has been impacted by the Covid-19 outbreak. While addressing the media RBI governor said economic activities have come to a standstill during the lockdown. The governor mentioned inflation is on a declining trajectory and could even reduce further.  Earlier, the central bank had lashed the repo rate by a record 75 basis points of 4.40 per cent and reserve ratio (CRR) by 100 bps to 3 per cent. 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 crore 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 per cent in the next financial year 2021-22. “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," said Das. While India’s exports have also contracted 34 per cent in March due to the lockdown measures, the announcement brings major relief for enterprises because there is six months’ time for them to not turn in NPA, according to an analyst. The speech also mentioned that ATM usage has been at 90 per cent around the country. Here are the key measures 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 per cent.
• Loans by NBFCs to real estate companies to get similar benefits as given by scheduled commercial banks.
• LCR requirement of banks brought down to 80 per cent from 100 per cent; 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
• Liquidity coverage ratio (LCR) requirement of banks brought down to 80 per cent cent from 100 per cent to be restored in phases by April next year

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