zashmaster
New member
The announcements on 17 Apr were expected to focus on relief packages for the MSME sector. In anticipation, the markets were in positive territory by a clear 3+ %. Points below are paraphrased from the speech of RBI governor.
Context
Context
- RBI has been proactive in the very critical situation
- There have been some announcements every 2-3 days
- Today's briefing focuses on specific meaures
- 150+ officers and service staff are in 'office quarantine' working on critical matters like currency supply
- Since previous Mar 27 address, macro situation has declined further. 9 trillion USD is the estimated impact on world economy due to lockdown.
- India is expected to have the highest GDP growth rate among G20 economies.
- IMF is projecting a V shaped recovery.
- Agriculture and food production in India is expected to be strong, despite the lockdown
- IIP for Feb 2020 was high; however Mar numbers would show lockdown impact - auto production, freight movement, exports, etc have shown declines already
- Banking operations have been running smoothly in lockdown - little downtime in internet and mobile banking; ATMs are running, business correspondents have been at 80%, etc.
- In Feb and Mar, RBI has injected more than 3% of GDP in liquidity; more TLTRO since Mar 27
- Redemption pressure faced by some mutual funds have moderated a bit
- Objectives - maintain liquidity, help bank credit growth, ease financial stress, smooth financial markets
- Focus on MSME and MFI
- TLTRO 2.0 - 50,000 crores to begin with - Banks have to use these for NBFC, with at least 50% going to small NBFCs
- All India financial institutions - NABARD, SIDBI, NHB, etc - would get additional funding of 50,000 crore. To be used for lending to and refinancing MSME, HFC The amount is with the consultation of these instis. RBI would add more if required. Funding would be at repo rate of 4.4%
- Liquidity Adjustment Facility - 6,9 lac crore has come to RBI via reverse repo. Another 25 basis point cut in reverse repo to 3.75
- WMA (Ways and Means Advance) limit to states increased to 69% - greater comfort to states to plan covid-19 measures - would be available till end of Sep
- NPA classification - Moratorium would be excluded in classifications of NPA. i.e Accounts that were good on Mar 1 would continue to be so even if the moratorium has been used ("Standstill")
- Banks to maintain a higher provision of 10% on such standstill arrangement. This is to contain the risk of moratorium
- Resolution timelines - extended to 300 days from 210 days
- Dividends by banks - Banks should not make dividend payouts
- LCR (Liquidity Coverage Ratio) brought down from 100% to 80% - would go up to 90% in Oct and 100% in Apr 21
- NBFC loans to real estate firms can be extended by 1 year without being classified as NPA
- More measures would come as needed