The central bank has clearly mentioned that scheduled commercial banks and co-operative banks shall not make any dividends stating that it will review its stand on the basis of the financial positions of the banks for the quarter ended September 2020.
RBI Governor Shaktikanta Das said that the measure has been taken to conserve cash. “It is imperative that banks conserve capital to retain their capacity to support the economy and absorb losses in an environment of heightened uncertainty," said Das.
It is one of the many measures taken by RBI to boost liquidity in the system. The central bank has also cut the reverse repo rate by 25 basis points to 3.75 per cent even as the repo rate at 4.4 per cent remains unchanged.
The difference between the two key rates suggests that the banks need not park their money with RBI and rather lend more to corporate and individuals. “This move shall be reviewed by the RBI based on the financial positions of the bank for the quarter ending September 30, 2020," Das added.
Another major announcement was the second installment of targeted long term repo operations (TLTRO) 2.0 . RBI will provide ₹50,000 crore in tranches of appropriate sizes mainly to ease credit to financial institutions such as Nabard, Sidbi, and NHB.
India’s foreign exchange reserves remain strong at $476 billion as of 10 April equivalent to 11.8 months of imports.
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 governor also mentioned that ATM usage has been at 90 per cent around the country.