Shaktikanta Das Highlights: RBI defers loan repayments by 3 more months; cuts repo rate 40 bps, eases monetary policy

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Updated:May 22, 2020 12:08:09 pm

RBI Governor Shaktikanta Das Press Conference | Highlights: Reserve Bank of India has extended the moratorium on loan repayments by another three months to 31 August 2020, while it also cut policy repo rate by 40 basis points to 4.0% after an unscheduled meeting of the Monetary Policy Committee.

Covid crisis, RBI Governor, NBFC, Shaktikanta Das, MFs sector, COVID-19 pandemic, Franklin Templeton, debt fund scheme,latest news on RBIRBI Governor Shaktikanta Das press conference Highlights

RBI Governor Shaktikanta Das Press Conference | Highlights: The Reserve Bank of India today announced several monetary easing measures, including extending moratorium on loan repayments by another three months, and an emergency cut in the policy repo rate. Governor Shaktikanta Das today said that the Monetary Policy Committee, after an unscheduled meeting, cut policy repo rate by 40 basis points to 4.0%. The RBI Monetary Policy Committee voted unanimously for reduction in the policy repo rate, while voted 5:1 in favour of the quantum of the cut, Shaktikanta Das said. Consequently, the reverse repo rate now stands reduced to 3.35%, while the MSF rate is down to 4.25%. To ease the financial stress on people and businesses, Shaktikanta Das said that the RBI has also allowed deferment of repayments of loans and working capital by another three months from June 1 to August 31 due to lockdown extension. Shaktikanta Das, while laying out the economic conditions prevailing in India amid the ongoing coronavirus crisis, also said that food inflation may remain under supply side shock, and that the elevated level of inflation in pulses is ‘worrisome’. RBI’s announcement follows the mega Rs 21 lakh crore economic package announced by the Narendra Modi government recently. In the wake of the ongoing coronavirus pandemic, RBI has so far announced various liquidity and monetary measures, totalling an economic value worth Rs 8 lakh crore. Meanwhile, FY21 GDP is expected to remain in negative due to the coronavirus pandemic.

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Highlights

    12:00 (IST)22 May 2020
    Expected contraction of the GDP is worrisome

    The expected contraction of the GDP is worrisome emanating from a significant drop in private consumption. While the RBI has taken steps to boost liquidity, one of the real challenges remains boosting of demand which we hope that subsequent announcements will address. - Shishir Baijal, Chairman & Managing Director, Knight Frank India

    12:00 (IST)22 May 2020
    Long-standing real estate industry demand for a one-time restructuring of loans could have been a major relief

    The extension on the moratorium and improved terms will provide a breather to industry and household borrowers alike. It would have been a big respite if the long-standing real estate industry demand for a one-time restructuring of loans were allowed along with the measures announced today - Shishir Baijal, Chairman & Managing Director, Knight Frank India

    11:58 (IST)22 May 2020
    India's repo rate cut is in-line with the rate cuts announced by developed economies like the USA and UK

    We are delighted with the reduction in prime lending rates announced today by the RBI. With a cumulative 115 basis point rate cut by RBI as a response to the impact of COVID -19, we are in line with the rate cuts announced by developed economies like the USA (150 bps) and UK (65 bps). Given the backdrop of an unprecedented economic situation, we are happy that the RBI has reduced the key policy rate and taken note of rate cut transmission to borrowers - Shishir Baijal, Chairman & Managing Director, Knight Frank India

    11:56 (IST)22 May 2020
    Fall in reverse repo rate would serve as a disincentive to banks

    In view of the large issues at the primary for the rest of the year from both central and state governments, the likely gains at the long end may come with elevated risks. The fall in the reverse repo rate would serve as a disincentive to banks who hold huge sums of liquidity to look at alternatives including gilts - Joseph Thomas, Head of Research - Emkay Wealth Management

    11:55 (IST)22 May 2020
    Interest rates across the curve will move lower from the current levels

    The potential reduction in the cost of funds and the extension of the moratorium will be supportive of financial stability which is of extreme importance as of today. We expect the rates across the curve to move lower from the current levels, though on a risk-adjusted basis, the short to medium term would hold a better value for long term investor portfolios - Joseph Thomas, Head of Research - Emkay Wealth Management

    11:53 (IST)22 May 2020
    RBI's repo rate cut is in-line with expectations of market

    The further cut in the repo rate by the RBI is more or less in line with expectations by the majority of the market participants. The cut has been effected considering the fact that there is growing economic and financial stress on account of the pandemic involving all major sectors of economic activity - Joseph Thomas, Head of Research - Emkay Wealth Management

    11:51 (IST)22 May 2020
    More reforms needed to support economy

    India would need more measures on a continuous basis on both fiscal and monetary front to revive the economy from the current phase of negative growth - Rajat Rajgarhia, MD & CEO, Institutional Equities, Motilal Oswal Financial Services

    11:50 (IST)22 May 2020
    Lowering cost of capital is some relief in these times

    RBI continues to support the monetary front by doing out of turn MPC meets to cut rates. Lowering the cost of capital is some relief in these times. Moratorium extension was expected, considering the economic activity levels - Rajat Rajgarhia, MD & CEO, Institutional Equities, Motilal Oswal Financial Services

    11:49 (IST)22 May 2020
    Markets will be focused on further steps by RBI to safeguard banking system

    Given the various dislocations that can emerge in the financial sector, markets will be focused on further steps by the RBI to safeguard the banking system (and broader financial system) - Suvodeep Rakshit, Vice President and Senior Economist, Kotak Institutional Equities

    11:48 (IST)22 May 2020
    Broader markets will focus on liquidity measures and regulatory measures

    The extension of the moratorium bodes well. However, broader markets will focus on liquidity measures such as the path of OMO purchases (preferably a calendar) and regulatory measures to ensure both liquidity and solvency concerns are adequately addressed - Suvodeep Rakshit, Vice President and Senior Economist, Kotak Institutional Equities

    11:46 (IST)22 May 2020
    Space for some further rate cut though the efficacy of rate cuts will progressively be lower

    The RBI’s decision continues to indicate that they remain proactive. With the indication that the growth will be negative, we continue to see space for some further rate cut though the efficacy of rate cuts will progressively be lower - Suvodeep Rakshit, Vice President and Senior Economist, Kotak Institutional Equities

    11:43 (IST)22 May 2020
    Extension of moratorium period, other factors will help more than repo rate cut

    Other factors, apart from repo rate cut, will have a bigger implication on the economy on an immediate basis - Indranil Pan, Cheif Economist, IDFC Bank, told Financial Express Online. 

    11:42 (IST)22 May 2020
    Repo rate cut may not immediately help

     “I think the other factors will have a bigger implication on the economy on an immediate basis. The repo rate cut may not immediately help, though in terms of easing the interest rates on consumers, it might,” Indranil Pan, Cheif Economist, IDFC Bank, told Financial Express Online. 

    11:06 (IST)22 May 2020
    Banks may get hit in the short term

    Rate cut and reverse repo rate cuts are moves in the right direction but risk aversion by banks is still there. Some restructuring of the loans news would have been a step in the right direction which the market was awaiting. Broadly it may be better for companies but banks may get hit in the short term. Overall the bonds rallied with yield on old 10y benchmark falling 15bps in a knee jerk reaction. Rupee moves are fairly muted since we have huge selling interest by nationalized banks, likely on behalf of RBI at 75.85 levels. Of course the equities and banks initial reaction is negative -  Abhishek Goenka, Founder & CEO, IFA Global.

    11:04 (IST)22 May 2020
    RBI's today's announcement is in the right direction and eases the liquidity situation with export and import companies

    'It was indeed a good policy by RBI. Extension of moratorium and converting the interest into term loans which essentially increases the payback cycle, swap facility for Exim banks, an extension of import payments and increasing the exporters' length of credit to 15 months from one year steps in the right direction and eases the liquidity situation with export and import companies,' said Abhishek Goenka, Founder & CEO, IFA Global.

    10:59 (IST)22 May 2020
    Rate cut of 40 bps is in-line with expectations

    “Rate cut of 40 bps in line with expectations as also the extension of loan moratorium. The measure to convert the moratorium interest payment into a term loan payable in the course of FY21 is the most important announcement. This can reduce NPA, at least in the next 12 months. The additional liquidity measures remain rather muted. The RBI also remains circumspect on growth and inflation outlook.” -- Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers

    10:54 (IST)22 May 2020
    Agri & allied activities: A beacon of hope

    Amid the challenging time, agri & allied activities are a beacon of hope as the rainfall is expected to be normal - RBI Governor Shaktikanta Das.

    10:51 (IST)22 May 2020
    RBI may fashion new instruments to deal with coronavirus crisis

    RBI will continue to be vigilant, will use all instruments, and fashion new ones to deal with the coronavirus crisis - Shaktikanta Das

    10:48 (IST)22 May 2020
    Inflation outlook highly uncertain

    Supply shock to food prices may show persistence in the next few months, depending on the state of the lockdown and time taken to restore supply chains after the lockdown.

    10:46 (IST)22 May 2020
    GDP growth in FY21 is expected to contract

    Even as it was expected that India and China would not see a contraction in their GDP, RBI Governor Shaktikanta Das said that GDP growth in FY21 is expected to remain in the negative territory, though expect some pick-up in growth in the second half. 

    10:43 (IST)22 May 2020
    RBI had earlier annoucned three months moratorium, deferment of interest payments, etc

    The Reserve Bank had earlier announced three months moratorium, deferment of interest payments on working capital facilities, easing of working capital requirements, relaxation in timelines for resolution of stressed assets.

    10:42 (IST)22 May 2020
    RBI Governor sets goals

    Shaktikanta Das said that he is announcing these measures with following goals:

    • To keep financial system sound, liquid and smoothly functioning
    • To ensure access to finance to those who tend to get excluded from the financial markets
    • To preserve financial stability
    10:39 (IST)22 May 2020
    High price of pulses is worrisome

    The elevated level of pulses inflation is worrisome, immediate step-up of open market sales can cool down cereal prices - Shaktikanta Das 

    10:35 (IST)22 May 2020
    Voluntary retention route for FPIs

    RBI announced voluntary retention route for FPIs and allowed extension of 3 months to meet 75% utilisation of investment limits.

    10:34 (IST)22 May 2020
    Outward remittances against normal imports brought to 12 months

    In order to manage importers' operative cycle, outward remittances against normal imports into India, is brought to 6 months from 12 month

    10:33 (IST)22 May 2020
    Margins for working capital to be restored to original level

    Lending institutions permitted to restore margins for working capital to original level by March 31, 2021 - RBI Governor

    10:32 (IST)22 May 2020
    RBI defers working capital

    Deferment of working capital during 6 months will be converted into term loan which can be repaid by March 2021 - RBI

    10:31 (IST)22 May 2020
    Limit of group exposure limit increased

    Group exposure limit of banks will be increased from 25% to 30% - RBI

    10:30 (IST)22 May 2020
    RBI announces consolidated sinking fund

    RBI Governor ease state government's compliance by consolidated sinking fund. 

    10:27 (IST)22 May 2020
    RBI Governor Shaktikanta Das extends the moratorium period by 3 months

    To ease the financial stress RBI Governor Shaktikanta Das has extended the moratorium period by another three months from June 1 to August 31 due to lockdown extension. 

    10:24 (IST)22 May 2020
    Rs15000 crore to EXIM banks

    RBI allocates Rs15000 crore to EXIM banks to avail US dollar swap facility.

    10:24 (IST)22 May 2020
    Maximum permissible period of pre and post shipment of credits increased from 1 year to 15 months. 

    The deepening of contraction in trade activities has hampered India. Maximum permissible period of pre and post shipment of credits increased from 1 year to 15 months. 

    10:22 (IST)22 May 2020
    Measures on market, exports & imports, debt servicing, etc to be announced today

    These measure to be announced today:

    improve functioning of market

    support exports and imports

    relief on debt servicing

    steps to ease the financial constraints of state governments

    10:21 (IST)22 May 2020
    Monetary transmission is swift

    Monetary transmission for banks has been working out swiftly - Shaktikanta Das 

    10:19 (IST)22 May 2020
    GDP is estimated to contract in current fiscal

    . Significant damage to India's  GDP is expected. GDP in FY21 to stay in negative territory - Shaktikanta Das

    10:18 (IST)22 May 2020
    Combination of fiscal, monetary, and administrative measures will help economy revive in the H2

    The combination of fiscal, monetary, and administrative measures will help economy revive in the H2 but downside risks remain significant. 

    10:16 (IST)22 May 2020
    Headline inflation will ease only after half year

    Headline inflation will remain firm in H1FY21. By Q3 and Q4, it is expected that inflation will ease due to base effects. 

    10:15 (IST)22 May 2020
    Highly uncertain inflation outlook

    The inflation outlook is highly uncertain. Supply chock in April will persist for the next coming months - RBI Governor. 

    10:13 (IST)22 May 2020
    Merchandise exports slumped to the worst level in 30 years

    India's merchandise exports slumped to the worst level in 30 years as coronavirus crisis paralysed demand across the globe - Shaktikanta Das

    10:12 (IST)22 May 2020
    MPC unanimously voted for 40 basis points cut in repo rate

    Shaktikanta Das said that MPC voted unanimously to policy repo rate reduction of 40 basis points.

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