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Home / News / Business News / Struggling economy gets RBI's boost, big announcement for banks
  • Business

    Struggling economy gets RBI's boost, big announcement for banks

    Shalini Ojha
    Written by
    Shalini Ojha
    Twitter
    Last updated on Apr 17, 2020, 02:56 pm
    Struggling economy gets RBI's boost, big announcement for banks
  • With the economy stung drastically by the coronavirus pandemic, RBI Governor Shaktikanta Das addressed media for the second time in a month to announce key measures.

    The apex bank cut its reverse repo rate by 25 basis points, bringing it to 3.75%. This move will push banks to make use of the excess funds towards lending.

    Here's more on the key announcements.

  • In this article
    Reverse repo rate changed for second time in a month A 40-day lockdown has brought economy to halt Norms for NPAs were relaxed too NBFCs were given relief like commercial banks Automobile sector suffered, so did exports Banking operations haven't been hit India's growth will post a turnaround in next fiscal year PM Modi said steps will improve credit supply
  • Repo rates

    Reverse repo rate changed for second time in a month

    Reverse repo rate changed for second time in a month
  • The reverse repo rate is the rate at which RBI borrows money from banks. As the rates are slashed, banks can now lend more money to various sectors, which will help churn the wheels of the economy.

    Just last month, RBI brought down repo rate (the rate at which the apex bank lends money to banks) from 5.15% to 4.4%.

  • Lockdown

    A 40-day lockdown has brought economy to halt

    A 40-day lockdown has brought economy to halt
  • Das said RBI is closely monitoring the situation in the country and has been taking proactive decisions.

    To note, India's nationwide lockdown will end on May 3, an extension of nineteen days from the earlier end date of April 14.

    The restrictions have brought the economy to a halt, with most sectors running out of capital. Industry bodies want financial aid.

  • Measures

    Norms for NPAs were relaxed too

  • Some other measures were also announced to provide more liquidity to non-banking finance companies (NBFCs). The RBI also relaxed norms pertaining to the labeling of non-performing assets (NPAs).

    RBI said the 90-day NPA norm will exclude the moratorium period for accounts for which lending companies have decided to extend moratorium or deferment, or which were standard on March 1, 2020.

  • Details

    NBFCs were given relief like commercial banks

  • Das said the three-month moratorium period, which commercial banks have extended, will also be applicable on loans that NBFCs give to real estate companies.

    RBI spiked WMA (ways and means advance limits) of states by 60% (over and above) to allow them to get more aggressive in dealing with COVID-19.

    On April 1, the WMA limit of states was increased by 30%.

  • Details

    Automobile sector suffered, so did exports

    Automobile sector suffered, so did exports
  • Das spoke for some 30 minutes where he noted that automobile production and sales have dipped sharply in the month of March. There was also a fall in electricity demand, he added.

    Exports suffered by 34.6%, which is far greater than what happened during the recession of 2008-09.

    He underscored that damage to industries was not calculated in the Index of Industrial Production (IIP) data.

  • Points

    Banking operations haven't been hit

    Banking operations haven't been hit
  • The Governor said banking operations have largely remained the same as customers are taking to internet banking.

    Further, he announced, "Banks will not make any further dividend payout in view of financial difficulties arising from COVID-19."

    He added that CPI inflation declined in March and is likely to follow a downward trajectory.

    It fell 170 bps from its January 2020 peak, Das underlined.

  • Growth

    India's growth will post a turnaround in next fiscal year

  • Das noted that India's growth in the current fiscal year will remain at 1.9% but predicted a massive turnaround in the fiscal year 2021-22.

    "India is expected to post a sharp turnaround and resume its pre-COVID growth trajectory by growing at 7.4% in 2021-22," he said, adding that the International Monetary Fund has painted the best picture of India among G20 countries.

  • Reactions

    PM Modi said steps will improve credit supply

    PM Modi said steps will improve credit supply
  • Soon after Das made the big announcements, Prime Minister Narendra Modi said these steps will improve credit supply and enhance liquidity.

    "These steps would help our small businesses, MSMEs (micro, small and medium enterprises), farmers and the poor. It will also help all states by increasing WMA (a credit policy to provide state governments with cash flow issues)," he tweeted.

  • IMF
  • International Monetary Fund
  • Reserve Bank Of India
  • Shaktikanta Das
  • G20
  •  
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