India is passing through a tough and unprecedented event “Corona Virus alias Covid-19” . Through this article, Ideation Advisory, has delineated various development and regulatory policies taken by our Govt that directly address the stranded situation experienced by Indian citizen and Indian entities.
Highlights from RBI Press Release
RBI press releases on 27th March 2020 broadly consisting of
- Expanding liquidity in the system and Reinforcing monetary transmission so that bank credit flows on easier terms
- Easing financial stress caused by Covid-19 disruptions by relaxing repayment pressure and improving access to working capital.
|Reduction in policy rate
|Repo rate has reduced to 4.40% and reverse repo to 4%.
|Targeted Long-Term Repos Operation
|Reserve Bank will conduct auctions of targeted term repos of up to three years tenor of appropriate sizes for a total amount of up to Rs.` 1,00,000 crore at a floating rate linked to the policy repo rate
|Cash Reserve Ratio (CRR)
|1. Liquidity in banking system though remains ample, to further strengthen the cash , it has been decided to reduce CRR of all banks by 100 basis point to 3.0% starting from fortnight beginning on 28 Mar 2020 till 26 Mar 2021.
2. Daily CRR maintenance from 90% to 80% from the first day of reporting fortnight beginning 28 Mar 2020. This is available up to 26 Jun 2020.
|Marginal Standing Facility (MSF)
|Banks can borrow overnight at their discretion by dipping up to 2 per cent into the Statutory Liquidity Ratio (SLR). This measure will be applicable up to June 30, 2020
|These above three measures relating to TLTRO, CRR and MSF will inject a total liquidity of Rs.` 3.74 lakh crore to the system. Total liquidity injection 3.4% of GDP.
|Easing financial stress
Moratorium on Term Loans
|Allow a moratorium of three months on repayment instalments in respect of all term loans outstanding as on 1 Mar 2020. Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, may be shifted across the board by three months.
|Deferment of Interest on Working Capital Facilities
|To allow a deferment of three months on payment of interest in respect of all such facilities outstanding as on March 1, 2020. The accumulated interest for the period will be paid after the expiry of the deferment period
|These moratorium and deferment will not affect credit history and NPA.
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