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.
Shaktikanta Das Highlights: RBI defers loan repayments by 3 more months; cuts repo rate 40 bps, eases monetary policy
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.
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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
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
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
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
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
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
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
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
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
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
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
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.
“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.
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.
'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.
“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
Amid the challenging time, agri & allied activities are a beacon of hope as the rainfall is expected to be normal - RBI Governor Shaktikanta Das.
RBI will continue to be vigilant, will use all instruments, and fashion new ones to deal with the coronavirus crisis - Shaktikanta Das
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.
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.
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.
Shaktikanta Das said that he is announcing these measures with following goals:
The elevated level of pulses inflation is worrisome, immediate step-up of open market sales can cool down cereal prices - Shaktikanta Das
RBI announced voluntary retention route for FPIs and allowed extension of 3 months to meet 75% utilisation of investment limits.
In order to manage importers' operative cycle, outward remittances against normal imports into India, is brought to 6 months from 12 month
Lending institutions permitted to restore margins for working capital to original level by March 31, 2021 - RBI Governor
Deferment of working capital during 6 months will be converted into term loan which can be repaid by March 2021 - RBI
Group exposure limit of banks will be increased from 25% to 30% - RBI
RBI Governor ease state government's compliance by consolidated sinking fund.
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.
RBI allocates Rs15000 crore to EXIM banks to avail US dollar swap facility.
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.
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
Monetary transmission for banks has been working out swiftly - Shaktikanta Das
. Significant damage to India's GDP is expected. GDP in FY21 to stay in negative territory - Shaktikanta Das
The combination of fiscal, monetary, and administrative measures will help economy revive in the H2 but downside risks remain significant.
Headline inflation will remain firm in H1FY21. By Q3 and Q4, it is expected that inflation will ease due to base effects.
The inflation outlook is highly uncertain. Supply chock in April will persist for the next coming months - RBI Governor.
India's merchandise exports slumped to the worst level in 30 years as coronavirus crisis paralysed demand across the globe - Shaktikanta Das
Shaktikanta Das said that MPC voted unanimously to policy repo rate reduction of 40 basis points.