Saswat Singhdeo

New Delhi: While Coronavirus pandemic continues to sweep the world shutting down economies, the Reserve Bank of India on Friday announced a slew of measures to help the country fight the economic blues resulting from the impact of the lockdown. The RBI also cut reverse repo rate by 25 basis points to 3.75%, while keeping the repo rate unchanged.

"Our mission is to do whatever it takes to flatten the epidemiological curve of the coronavirus pandemic. RBI has been proactive and closely monitoring the evolving situation. It has been coming out with a slew of announcements to fight the virus," said RBI Governor Shaktikanta Das while addressing a press conference today.

Das said in order to encourage banks to deploy the surplus funds in investments and loans in productive sectors of the economy, it has been decided to reduce the fixed-rate reverse repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 4 percent to 3.75 percent with immediate effect.

The reverse repo rate is the rate banks earn by parking deposits with the RBI.

"The policy repo rate remains unchanged at 4.4 percent, and the marginal standing facility rate and the bank rate remain unchanged at 4.65 percent," he said.

"Cumulative losses to global GDP in 2020 and 2021 at the US $9 trillion, worst global recession ever since The Great Depression. IMF projection of 1.9% GDP growth for India is highest in G20. India is among the handful of countries that are projected to strenuously stick to growth trajectory amid COVID-19. India is expected to post a sharp turnaround in 2020-21," added Das.

"India is among the handful of countries projected to register a positive growth rate amid the #Covid_19 crisis. The country is expected to resume its pre-slowdown trajectory by growing at 7.4% in 2021-22. RBI proposes to maintain adequate system liquidity, facilitate and incentivise bank credit flow, ease financial stress," the RBI Governor added.

Surplus liquidity in the banking system has risen significantly in the wake of government spending and the various liquidity enhancing measures undertaken by the RBI, he noted.

Das also announced special refinance facilities for a total amount of Rs 50,000 crore to Nabard, Sidbi and National Housing Bank (NHB) to enable them to meet sectoral credit needs. To provide greater comfort to the states for undertaking COVID-19 containment and mitigation efforts, the RBI announced a 30 percent increase in the ways and means advances limit.

"Payment moratoriums by banks for COVID-19 outbreak can be excluded from the 90-day moratorium period. LCR requirement of Scheduled Commercial Banks will be brought down from 100% to 80% with immediate effect. NBFC loans to commercial real estate projects delayed that can be extended by one more year without treating it as restructuring," stated Das.

It has been decided that in respect of all accounts for which lending institutions decide to grant moratorium or deferment, and which were standard as on March 1, 2020, the 90-day NPA norm shall exclude the moratorium period, i.e., there would an asset classification standstill for all such accounts from March 1, 2020 to May 31, 2020.

Pointing out that RBI is monitoring all macro parameters on a continuous basis, he said, economic activity has come to standstill during the lockdown.

The impact of COVID-19 is not captured in the index of industrial production (IIP) data for February, he said, adding that the contraction in exports in March at 34.6 percent is much more severe than the global financial crisis of 2008-09.

He said vehicle production and sales declined sharply in March and so did electricity consumption.

Appreciating the effort of banks and other institutions in keeping the financial market operational, Das said, there was no downtime of internet or mobile banking during the lockdown and banking operations were normal.

Banks, financial institutions have risen to the occasion to ensure normal functioning during the outbreak of this pandemic, he noted.

Providing relaxation to lenders, Das said banks shall be exempted from making dividend payment in the light of financial difficulties posed by COVID-19.

On the inflation front, he said consumer price index (CPI) based inflation has declined in March and it is expected to further ease. RBI will take advantage of the falling price situation and pass on benefit to borrowers, Das hinted.

"We shall cure, and we shall endure," said Das while concluding the presser.

(With agency input)