RBI Joins the Fight against Covid-19

India is fighting with the pandemic situation and is under complete lockdown for 21 days that started on 24th of March and will end by the 14th of April 2020. We all know that this situation is going to bring all economic activity to a grinding halt, but as the whole country continues to be under lockdown, the Reserve Bank of India (RBI) announced a number of measures today to boost the economy. Yes, RBI joined the big fight today with a host of measures aimed at minimizing the damage from the Covid-19 pandemic. RBI governor Shaktikanta Das addressed a press conference where he announced A 4-step battle plan to combat coronavirus. The measures include ensuring liquidity in the market, ensuring that bank crediting loans are sustained relaxing repayment pressures and minimizing market volatility.

Not just that but the Governor also announced a three-month moratorium on installments and in interest rates on loans. This is definitely a step that is going to be a huge relief for all the EMI payers. The three-month moratorium will apply to various kinds of loan types including corporate loans, home loans, and car loans. Not just that but the personal loans will also qualify for this. Additionally, he announced the reduction of repo rate by 75 basis points.

Here is the excerpt from Shaktikanta’s announcement: “After extensive discussions, the MPC voted for a sizeable reduction in the policy repo rate and for maintaining the accommodative stance of monitory policy as long as necessary to revive growth and mitigate the impact of Covid-19 while ensuring inflation remains within the target. While there where some differences in the quantum of reduction, the MCP voted by 4:2 majority to reduce the policy repo rate by 75 basis points to 4.4 percent”.

“Regulatory policies can broadly be delineated under four categories. First, measures to expand liquidity in the system sizably to ensure that financial markets and institutions are able to function normally in the face of Covid related dislocations. Second, steps to reinforce monetary transmission so that bank credit flows on easier terms are sustained to all those who have been affected by the pandemic. Third, efforts to ease financial stress caused by COVID-19 disruptions by relaxing repayment pressures and improving access to working capital; and fourth, endeavor to improve the functioning of markets in view of the high volatility experienced with the onset and spread of the pandemic”, he added.In addition to that, these are the major lead pointers that where placed by the Governor in the press conference today:

• Relax repayment pressures.
• Reduction in reverse repo rates by 90 basis points
• Indian Banking System is safe and sound
• Cash Reserve Ratio reduced by three percent
• 150 RBI Staff quarantined.
• Minimize market volatility.
• Food prices expected to soften further.
• Lending institutions allow moratorium of three months.

“The economic outlook globally is uncertain and obviously negative. Financial stability is the topmost priority of the RBI in this crisis,” states Shaktikanta, as India entered the third day of a 21-day countrywide lockdown to curb the rapid spread of the coronavirus outbreak.

In the session, Shaktikanta also warned about the upcoming scenario while outlining the risks to the Indian economy from coronavirus. His stress was on the need of keeping the credit let flow to the stressed areas of the economy. He also predicted a wave of the recession coming for the whole world and said even India won’t be able to dodge the downturn. Though in the recent period, the RBI has been in action on a daily basis with efforts to decrease and improve the financial stress of the country, while building confidence and keeping the financial system operating & functioning smoothly. But, the truth is India will need more than that in order to safeguard itself.