A day after the Modi government announced a Rs 1.70 lakh crore coronavirus relief package, the Reserve Bank of India (RBI) joined the big fight on March 27th, 2020 announced a slew of measures aimed at minimising the damage from virus.
RBI governor Shaktikanta Das announced a massive slash in the key repo rate to 4.4 per cent, to revive economic growth as the country fights against coronavirus outbreak.
The RBI decided to reduce the Cash Reserve Ratio (CRR) of all banks by 100 basis points to 3 per cent of Net Demand and Time Liabilities with effect from the fortnight beginning March 28th, 2020 for a period of one year.
On the other hand, RBI governor Shaktikanta Das announced that all the regional, rural banks, co-operative banks, NBFCs including Housing Finance Companies are permitted to allow a three-month moratorium on payment of installments of all term loans outstanding on March 1st, 2020.
RBI governor Das announced that the RBI repo rate was cut by 75 basis points to encourage banks to give more to business rather than deposit it with RBI. The RBI chief said that measures will result in total liquidity injection of Rs 3.74 lakh crore to the system.
“All banks, lending institutions may allow a three-month moratorium on all loan. Lending companies, banks are allowed to defer interest on working capital repayments by three months. Banks may also reassess working capital cycle and will not be treated as non-performing assets,” RBI Governor said.
He added, “Priority is to undertake strong and purposeful action to protect domestic economy, Need for all stakeholders to fight against the pandemic and banks should do all they can to keep credit flowing.”
RBI Governor Das also urged the depositors should not resort to panic withdrawal of their deposits.
“Would urge those with deposits in private banks to not indulge in panic withdrawal. COVID-19 is upon us but this too shall pass. Stay clean, stay safe and go digital,” he said.
Union Finance Minister Nirmala Sitharaman hailed the intiative taken by the RBI. “The macro economic fundamentals of the Indian economy are sound, and in fact stronger than what they were in the aftermath of the global financial crisis of 2008-09,” Sitharaman said.