Second time within a month, the RBI Governor Shaktikanta Das has slashed the reverse repo rate by 25 basis points from 4 per cent to 3.75 per cent.
The RBI governor said “The mission is to minimize the epidemiological damage in the country due to coronavirus. I want to convey the RBI’s resolve and the way forward.”
Earlier also, on March 27, to help the economy in crises due to coronavirus, the RBI had slashed the repo rate by 75 basis points to 4.40 per cent from 5.15 per cent.
There were calls that the 75 bps cuts were not sufficient and that RBI could go for more rate cuts and liquidity measures. Many brokerages had said RBI could slash the lending rates by another 100 bps.
Simultaneously, the reverse repo rate was cut by 90 basis points to 4 per cent from 4.90 per cent to ensure that banks start lending to the productive sectors of the economy.
The additional measures announced by the RBI governor are as:
- Targeted long-term repo operation (TLTRO) 2.0 operations. LTRO of Rs 50,000 cr to begin with in many tranches for NBFCs
- 50% of the funds are embarked in TLTRO 2.0 is for small and medium-sized NBFCs
- A special Rs 50,000 crore refinance facility for NABARD (RS 25,000 crore), SIDBI (Rs 15,000 crore) and NHB (Rs 10,000 crore)
- 60% of ways and means advances allowed to states until September 30, 2020
- NPA classifications will exclude the three-month moratorium period till May-end
- 90-day non-performing assets (NPA) norm would not apply on moratorium granted on existing loans by banks.
- Banks will need to maintain additional provisioning of 10 per cent on standstill accounts
- Liquidity Coverage Ratio (LCR) requirement relaxed from 100% to 80% with immediate effect. LCR requirement to be restored to the previous level in two phased i.e. in October 2020 (to 90 per cent) and April 2021 (100 per cent).
- Banks won’t announce dividends until further notice
- NBFCs’ loans to delayed commercial real estate projects can be extended by a year without restructuring
- Loans given by NBFCs to real estate companies to get similar benefit as given by scheduled commercial banks
Further added, this is not the last of the announcements on financial support during the crisis. Hence, the RBI will bring some more measures in the future in the interest of the economy depending upon the situations will arise.