RBI Governor Highlights: Shaktikanta Das cuts reverse repo; pumps in money, liquidity; eases rules for banks, NBFCs

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Updated: April 17, 2020 6:31:48 pm

RBI Governor Shaktikanta Das Highlights: Reserve Bank of India Governor Shaktikanta Das today brought in a slew of measures to provide liquidity, facilitate bank credit, enable normal functioning of the markets, and ease financial stress to an economy struggling against the deadly coronavirus.

 RBI Governor Live, Shaktikanta Das Live CoverageRBI Governor Shaktikanta Das address comes at a time when there are calls on the government and the central bank to ease monetary and fiscal conditions further

RBI Governor Shaktikanta Das Highlights: Reserve Bank of India Governor Shaktikanta Das today brought in a slew of measures to provide liquidity, facilitate bank credit, enable normal functioning of the markets, and ease financial stress to an economy struggling against the deadly coronavirus. Among the emergency measures today, RBI cut the reverse repo rate by 25 basis points to 3.75%, while keeping the repo rate unchanged, discouraging banks from parking more money with the central bank. Further, RBI will also pump in lakhs of crores of rupees into the system, by giving money to financial institutions, allowing more borrowing, and letting states get more money. Shaktikanta Das announced Rs 50,000 crore special finance facility to be provided to NABARD (Rs 25,000 crore), SIDBI (Rs 15,000 crore), and NHB (Rs 10,000 crore). He said that the surplus capital will help to refinance the commercial banks and housing finance banks to infuse liquidity into the market. In another major announcement, loans given by NBFCs to real estate companies will be given similar benefits as given by scheduled commercial banks. To benefit NBFCs and micro-financial institutions, the RBI said it will conduct targeted long-term repo operations (TLTRO) 2.0 worth Rs 50,000 crore, which can be further increased. To empower states for adequate borrowing, the RBI has also increased WMA limits by 60 per cent, to plan their market borrowings better. This facility will be available till September 30. The RBI has also asked all banks to not make any dividend payments to shareholders due to the ongoing financial challenges. The Reserve Bank has brought down the LCR (Liquidity Coverage Ratio) requirement of banks to 80% from 100%, giving more liquidity to banks. Earlier, last month, the RBI cut the repo rate by a massive 75 basis points, while Finance Minister Nirmala Sitharaman had announced a mega economic relief package worth about Rs 1.7 lakh crore.

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Highlights

    18:24 (IST)17 Apr 2020
    Important to ensure that banks have sufficient cash flow to meet increasing lending requirements

    RBI has done well to initiate a series of measures that will infuse more liquidity into the banking system and allow it to lend more generously to borrowers. At a time when all economic activity has been halted and businesses are facing difficult times, it is important to ensure that banks have sufficient cash flow to meet increasing lending requirements. Reduction in the reverse repo rate and stopping of dividend payments will help towards this. - Krishna Chandra Sahoo, Global Product Manager, Vetphage Pharmaceuticals

    15:22 (IST)17 Apr 2020
    Right incentives for the bank to lend the money rather than keep with RBI

    It was heartening to see that RBI is taking a lot of concrete actions to ensure that the liquidity in the banking system is utilized for the purpose of lending to the corporate sector. With almost Rs.6.9 lac crores lying in Reverse repo, it is clear that the banks are not forthcoming with credit disbursals. A 25 bps reduction in reverse repo will create the right incentives for the bank to lend the money rather than keep with RBI. - Raghvendra Nath, MD, Ladderup Wealth Management

    15:18 (IST)17 Apr 2020
    RBI announcements to ensure that smaller players will also get access to liquidity

    After announcing several relief measures in his previous address recently, to counter the economic slowdown, these new measures announced today will definitely bring adequate liquidity in system, facilitate bank credit flow, ease financial stress & help India emerge as a leader in a post-COVID-19 world. Relaxations for real estate is also important as the sector employs a large number of people. These are certainly very good announcements particularly on the liquidity front and today's announcements will ensure that even the smaller players will also get access to liquidity - Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group

    15:15 (IST)17 Apr 2020
    RBI tried to give perfect dose to improve liquidity in system

    A 60% enhancement in WMA limit for state governments is mainly to provide additional liquidity to states to meet increased expenditures in a pandemic crisis. This will also pacify the concerns related to likely increase in bond supply issues from the state government. Similarly, reduction in LCR and reverse repo rate may essentially result in additional liquidity for banks, which should prompt banks to lend to low rated companies and infrastructure projects too. In a nutshell, we believe RBI has tried to give a perfect dose to improve liquidity in the system and address concerns of various sectors. -  Lav Chaturvedi, ED & CEO Reliance Securities.

    15:00 (IST)17 Apr 2020
    Announcement to provide Rs 50k cr to MSMEs a booster shot for the sector

    The decision by RBI Governor Shaktikanta Das to provide Rs 50,000 crore to Micro, Small and Medium Enterprises (MSMEs) has come as a booster shot for the sector. Reeling under the massive debilitating impact of the covid-19 pandemic outbreak and the extended Pan-India lockdown, several MSME units in the country have not been in a position to conduct normal business activities. This has adversely impacted their cash flows, eaten away atleast six months of their potential profits and led to a tightening of their liquidity positions - Mahesh Singhi, Founder & MD, Singhi Advisors

    14:48 (IST)17 Apr 2020
    More reforms, guidelines and measures can be expected from RBI

    RBI continues to be very proactive to ensure financial stability on the system. The continued measures to boost system liquidity and help manage system stress are positive. Some of the liquidity and asset classification measures should help the large housing finance companies, as they have large diversified books. However, the systemic challenges continue to be quite significant as there is both demand and supply destruction in the economy which have significant balance sheet impact on the BFSI firms. So, with time, more reforms, guidelines and measures can be expected from RBI as the extent of systemic challenges become more visible - Naveen Kulkarni, Chief Investment Officer, Axis securities

    14:43 (IST)17 Apr 2020
    RBI may have to continue extending its support to banking system

    Even after the lockdown ceases, the RBI may have to continue extending its support to the banking system in the form of macro-prudential measures. 40 days (or more) of business inactivity may open a slew of challenges before the corporates and in turn the financial system- Navneet Munot, ED & CIO, SBI Mutual Fund

    14:41 (IST)17 Apr 2020
    RBI needs to address these issue

    Few other key issues which will need addressing by RBI in our view is (a) guidance on the OMO and (b) continued support to the banking system in case the financial stress amongst the corporates (apart from the commercial real estate) come to the fore amidst the COVID-19 led growth slowdown- Navneet Munot, ED & CIO, SBI Mutual Fund

    14:40 (IST)17 Apr 2020
    RBI measures pertinent actions ‘to begin with'- Navneet Munot, ED & CIO, SBI Mutual Fund

    Unusual times need unusual response and the governor has adequately come forward to impress their cognizance of the current and future probable pain points in the financial system. They have reiterated to do ‘whatever it takes’ to support the financial system and economy in general. These measures were some pertinent actions ‘to begin with’- Navneet Munot, ED & CIO, SBI Mutual Fund

    14:29 (IST)17 Apr 2020
    RBI's stand to take further measures provides further solace to markets and economy

    The much-needed liquidity support to the struggling NBFC/HFC /MFI sector in the form of TLTRO 2 and refinancing through NABARD, NHB and SIDBI would aid to ease the incumbent funding and liquidity issues in the sector. The further deduction of reverse repo rate by 25 bps to 3.75% would push the lending by banks to productive channels of the economy. RBI stands ready to take further measures as and when required, which indeed provides further solace to markets and the economy. - Jyoti Vaswani, CIO, Future Generali India Life Insurance

    14:26 (IST)17 Apr 2020
    Breather for realty sector

    Revising the reserve repo rate to 3.75% will promote the banks to infuse liquidity parked with them into the market thereby easing the liquidity. The Real estate Industry which has been cash strapped for more than a year now can expect a breather as loans given by the NBFCs for will not be classified as NPA even on non-repayment for a period of 1 year. - Farshid Coopers, Managing Director of Spenta Corporation 

    14:21 (IST)17 Apr 2020
    RBI's announcement will give borrowers, lenders breathing space to stablise from unexpected financial

    Along with the reduction in repo rate cut it has been announced that the NPA classifications will exclude the three-month moratorium period till May-end, which again is a welcome measure. Hopefully, this will further give borrowers and lenders breathing space to stablise from the unexpected financial and psychological jolt out of this pandemic. The announcement today is a step towards diminishing the coronavirus impact on the economy and ensuring the normal functioning of financial markets. - Siddhartha Mohanty, MD&CEO, LIC Housing Finance

    14:19 (IST)17 Apr 2020
    RBI's efforts will help businesses especially SMEs, agricultural sector

    We hope that with the additional liquidity of Rs 50,000 crore provided by Reserve Bank Of India will help initiate the support from the banks, helping with much-needed support to the businesses especially SMEs and the agricultural sector. This will be beneficial for the economy as a whole and would provide an impetus to economic recovery. We expect sharp downgrades to FY21 earnings and also corporates seeking liquidity to support the supply chain. We would expect the RBI and Finance Ministry to come up with additional tools to boost the economic activity. - Palka Arora, Senior Vice President, Master Capital Services

    14:07 (IST)17 Apr 2020
    There are a few slivers of brightness amidst the encircling gloom

    The Reserve Bank Governor Shaktikanta Das on Friday said there are a few slivers of brightness amidst the encircling gloom and hoped that India will stage a sharp V-shaped recovery in 2021-22 as projected by the International Monetary Fund (IMF).

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    13:56 (IST)17 Apr 2020
    RBI Governor hopes India will stage sharp V-shaped recovery in 2021-22

    "For 2021, the IMF projects sizable V-shaped recoveries: close to 9 percentage points for global GDP. India is expected to post a sharp turnaround and resume its pre-COVID pre-slowdown trajectory by growing at 7.4 per cent in 2021-22," RBI Governor Shaktikanta Das said.

    13:49 (IST)17 Apr 2020
    Allotment of Rs 10,000 crore to National Housing Bank, a big move for real estate sector: Anuj Puri

    “Among the various measures announced, commendably its allotment of Rs 10,000 crore to National Housing Bank, is a big move for the real estate sector reeling under the liquidity crisis. It will help provide capital to HFCs and eventually provide major relief to developers battling liquidity issues in COVID-19 times,” said Anuj Puri, Chairman, ANAROCK Property Consultants.

    13:47 (IST)17 Apr 2020
    RBI measures to give a boost to real estate, ease liquidity concerns of banks, NBFCs

    In a bid to infuse liquidity into the system and accelerate the economy reeling under the Covid-19 crisis, the Reserve Bank of India (RBI) today announced several measures which, besides easing the liquidity concern of banks, NBFCs and other financial intermediaries, will also give a boost to the real estate sector.

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    13:41 (IST)17 Apr 2020
    RBI allows NBFCs to extend DCCO for loans to commercial real estate by one year

    The RBI on Friday allowed non-bank financial companies to extend the date for commencement of commercial operations (DCCO) for loans given to commercial real estate by additional one year without considering it as restructuring. Currently, RBI has permitted banks to extend the DCCO in respect of loans to commercial real estate projects delayed for reasons beyond the control of promoters by additional one year, over and above the one-year extension permitted in normal course, without treating the same as restructuring.

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    13:33 (IST)17 Apr 2020
    Bank deposit rates may fall soon

    The announcement of TLRTO 2 directed towards the NBFC sector is a much need initiative given the Covid related moratorium optionality that this sector had to offer its borrowers. This should allow for more broad-based availability of liquidity under this facility. The 25 bps cut in reverse repo would help bring down the short term rates by 25-50 bps as the banking system continues to be in surplus liquidity mode. We could see a reduction in bank deposit rates too in the coming weeks. - Lakshmi Iyer, Chief Investment Officer (Debt) & Head Products, Kotak Mahindra Asset Management Company (KMAMC)

    13:20 (IST)17 Apr 2020
    Low hope in realty sector despite RBI's measures

    We welcome the move of the RBI to give some breather to the economy and infuse liquidity in the market, however it doesn't really change anything for the real estate industry as a whole. Actual cash flow and relief will be seen only when the lock-down is lifted and we are over the COVID -19 crisis. The sentiment in the real estate industry lies low even if the government and the RBI have provided some respite. Continued support may be required to help the real estate sector and the economy to revive until we deal with the pandemics ripple effects. - Rahul Gover, CEO, SECCPL--

    13:19 (IST)17 Apr 2020
    Measures announced are relatively small in terms of their impact on the quality part of the bond market: Suyash Choudhary

    The measures today are relatively small in terms of their impact on the quality part of the bond market. Their effect on lower rated borrowers will depend upon risk appetite of lenders as mentioned above. From an absolute risk versus reward perspective, front end (up to 5 year) quality bonds provide the best value. Long duration is quite attractive as well, both on term spreads as well as on gap from expected nominal GDP. However, its sustained performance will importantly depend upon the RBI unveiling a credible plan for financing the substantially expanded fiscal deficit in the year ahead: Suyash ChoudharyHead – Fixed Income, IDFC AMC

    13:18 (IST)17 Apr 2020
    RBI's initiatives will help in maintaining liquidity in small businesses

    The initiatives taken by the RBI are going to help to maintain liquidity in small businesses that otherwise are on the brink of closure due to liquidity crunch. On the one side, it will definitely increase the liquidity in the market during this pandemic, but the government should also provide some relief on taxation front which is also important to make businesses sustainable for the long run in the market. - Rajesh Gupta, Co-Founder & Director, BUSY Infotech

    13:11 (IST)17 Apr 2020
    Accounts provided with the moratorium, will see an asset classification standstill: 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, that is, there would an asset classification standstill for all such accounts from March 1, 2020 to May 31, 2020,” RBI Governor said.

    13:01 (IST)17 Apr 2020
    RBI encourages banks to lend more, cuts revers repo rate by 25 bps

    While encouraging banks to lend more to the public by cutting the reverse repo rate to 3.75% from 4%, Das highlighted that the RBI absorbed Rs 6.9 lakh crore from the banks on April 15 alone, adding that there is enough liquidity available in the system.

    12:58 (IST)17 Apr 2020
    Banks won’t hand out dividends; RBI relaxes requirement, frees up capital to maintain financial health

    In an effort to strengthen the financial system of the country’s financial institutions, the Reserve Bank of India (RBI) on Friday decided to freeze dividend payments by banks for the financial year 2019-20. Addressing a televised speech, RBI Governor Shaktikanta Das said, “It is imperative that banks conserve capital to retain their capacity to support the economy and absorb losses in an environment of heightened uncertainty. It has, therefore, been decided that in view of the COVID-19-related economic shock, scheduled commercial banks and cooperative banks shall not make any further dividend payouts from profits pertaining to the financial year ended March 31, 2020 until further instructions.”

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    12:46 (IST)17 Apr 2020
    MPC to announce another cut?

    While talking about the falling inflation, RBI governor Shaktikanta Das added that such an outlook would make policy space available to address the intensification of risks to growth and financial stability brought about by Covid-19. The retail inflation for March fell to a four-month low of 5.91 per cent on cheaper food articles.

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    12:45 (IST)17 Apr 2020
    Inflation to fall below 4%?

    RBI governor Shaktikanta Das on Friday said the inflation is on a declining trajectory and could fall below the central bank’s 4 per cent target by the second half of this fiscal amid challenges posed by Covid-19 pandemic. He said the consumer price index based retail inflation has fallen by 170 bps from its January 2020 peak.

    12:43 (IST)17 Apr 2020
    RBI monitoring all macro parameters on a continuous basis: Shaktikanta Das

    Pointing out that the Reserve Bank of India (RBI) is monitoring all macro parameters on a continuous basis, he said, economic activity has come to standstill during lockdown. The impact of Covid-19 is not captured in index of industrial production (IIP) data for February, he said, adding that contraction in exports in March at 34.6 per cent was much more severe than global financial crisis of 2008-09. He said vehicle production and sales declined sharply in March and so did electricity consumption.

    12:42 (IST)17 Apr 2020
    RBI to use all instruments to deal with Covid-19 challenges

    Reserve Bank of India Governor Shaktikanta Das on Friday assured that the central bank will use all instruments to deal with the challenges posed by the outbreak of Covid-19. He also said that this is not the last of the announcements on financial support during the crisis, stating that the central bank will come up with responses in the future in the interest of the economy based on evolving situations.

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    12:37 (IST)17 Apr 2020
    RBI comes rescue needy sectors

    The tone of RBI is of empathy and support to needy sectors. The TLTRO focused on mid size NBFCs and MFIs is positive. The 90 day extension in npa reckoning for stressed standard assets as on 1 March effectively postpones npa classification for accounts that were slipping to NPA between March and May. Given the optimism around economy coming back in phases and the support being extended through emergency COVID loans and other lines of credit, this will help all sectors , especially MSME and Retail. The 90 day deferment given for NCLT filing will help banks, if it can be taken as saving on 20% additional provision in these cases. - Padmaja Chunduru, MD & CEO, Indian Bank

    12:21 (IST)17 Apr 2020
    Deferment of payment up to 1 year will allow developers more time to construct and deliver projects on time

    Allowing NBFCs, who have given loans to real estate companies to get similar benefits as given by the scheduled commercial banks, at a challenging time like this is an encouraging sign. Commercial real asset class loans will also observe a momentum as deferment of payment up to 1 year will allow developers more time to construct and deliver projects on time. With few construction activities looking to re-start post 20th April, we are hopeful that the situation normalizes and India moves to a path of recovery - Hakim Lakdawala, Group Promoter, Goodwill Developers

    12:19 (IST)17 Apr 2020
    RBI's move intends to ensure cash flow and liquidity in the market

    The decision of revising the reserve repo rate from 4% to 3.75% is one such commendable step taken by the RBI. This step is intended to ensure cash flow and liquidity in the market. - Hakim Lakdawala, Group Promoter, Goodwill Developers

    12:13 (IST)17 Apr 2020
    RBI's liquidity provisions will enable HFCs and NBFCs to raise funds through bonds, other means

    The liquidity provisions made by RBI through Rs 50,000 TLTRO deployment will enable HFCs and NBFcs to raise financing through bonds, commercial papers etc. Special Refinancing facility of Rs 10000 crore announced for National Housing Bank will ease some of the liquidity challenges for housing financing companies to get bank financing in the wake of COVID 19 crisis. - Ravindra Sudhalkar, CEO at Reliance Home Finance

    12:08 (IST)17 Apr 2020
    Reserve Bank provides financial stability in crisis period

    Clearly, the amount will be substantially higher for the whole NBFC and HFC sector and particularly in a scenario where they don’t get the moratorium from banks, something on which clarity is yet to emerge. In that context, the steps on TLTROs and refinance from FIs will go a long way to meet these short term liquidity gaps in the shadow bank sector and ensure their sustainability and therefore, financial stability in the crisis period. - Suman Chowdhury, Chief Analytical Officer at Acuité Ratings & Research.

    12:06 (IST)17 Apr 2020
    RBI's move is expected to address the emerging liquidity crisis in the NBFC and the HFC sector

    RBI’s announcement on TLTRO 2.0 for an amount of Rs 50,000 Cr specifically for deployment in investment-grade mid and small NBFCs is expected to address the emerging liquidity crisis in the NBFC and the HFC sector. - Suman Chowdhury, Chief Analytical Officer at Acuité Ratings & Research 

    12:00 (IST)17 Apr 2020
    RBI's move will encourage NBFCs to lend to MSMEs

    The ability to grant relaxed NPA classification to borrowers and excluding NPA classification from the moratorium period will encourage NBFCs to lend to MSMEs without worrying about the impact such lending may have on their NPAs, which have been high - Rumki Majumdar, Economist, Deloitte India.

    11:57 (IST)17 Apr 2020
    Channelising money through MFIs, NBFCs is going to be crucial

    It is very important that businesses, especially MSMEs, must have access to funds so that poor growth scenario doesn’t turn into a crisis or depression. Therefore, in addition to announcing a package of INR 50,000 to meet sectoral credit needs and a 25 basis points rate cut, the RBI also advised banks to invest 50% of funds under TLTRO-2 to small and mid-sized NBFCs. This is an important move because with balance sheets coming under stress, banks may remain averse to MSME lendings. Therefore, channelising money through MFIs, NBFCs is going to be crucial. - Rumki Majumdar, Economist, Deloitte India.

    11:53 (IST)17 Apr 2020
    RBI is still not willing to take on credit risk

    Overall, the current measures are in continuation of measures taken so far. However, these second stage of measures are better targeted towards NBFC and HFC sector and there may be more steps on the anvil. However, the RBI is still not willing to take on credit risk. Further increase in banks' provisioning requirements suggests that financial sector will have to bear the bulk of COVID19 costs. - Madhavi Arora, Economist, Edelweiss

    11:48 (IST)17 Apr 2020
    Non-banks with limited incremental funding options can lend without fear

    The refinancing measures through NHB, SIDBI, NABARD, etc. is a welcome relief to HFCs and NBFCs. Non-banks with limited incremental funding options were facing increasing risks of default. - Vydianathan Ramaswamy, Director- Ratings, Brickwork Ratings

    11:44 (IST)17 Apr 2020
    Banks need to act fast in extending credit

    Reduction in LCR limits for banks to 80% from 100% is a good liquidity measure in the current economic situation. However, banks need to act fast in extending credit to India Inc. - Vydianathan Ramaswamy, Director- Ratings, Brickwork Ratings

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