RBI announces new relief measures to tackle economic crisis

RBI Governor Shaktikanta Das yesterday announced much-needed relief for small and medium-sized financial organisations including NBFCs and MFIs, which have been struggling to operate in the wake of the Covid-19 pandemic. The announcement comes after reports that the government was planning to releas

BY Realty Plus
Published - Saturday, 18 Apr, 2020

RBI announces new relief measures to tackle economic crisis

RBI Governor Shaktikanta Das yesterday announced much-needed relief for small and medium-sized financial organisations including NBFCs and MFIs, which have been struggling to operate in the wake of the Covid-19 pandemic. The announcement comes after reports that the government was planning to release another stimulus package to support such smaller businesses. Points to summarise RBI's fresh measures to ease economic pressure:

It will conduct a second round of targeted long term repo operations (TLTRO) or TLTRO 2.0 for an initial amount of Rs 50,000 crore.
RBI will provide special refinance facilities for an amount of Rs 50,000 crores to National Bank for Agriculture and Rural Development (NABARD), Small Industries Development Bank of India (SIDBI), and National Housing Bank (NHB) to enable them to meet sectoral credit needs.
Fresh round of TLTRO operations will benefit smaller finance organisations to help them with cash flow to businesses.
RBI is open to further increase the amount to help refinance NBFCs and other small-scale financial institutions if the need arises.
RBI undertook three long-term repo operations to help ease the liquidity situation. Das said a TLTRO operation of Rs 25,000 crore will be conducted on the day itself.
RBI is working to maintain adequate liquidity in the system, facilitating and incentivising healthy cash flow from banks, easing the overall financial stress and enabling formal working of markets.
RBI noted that the 90-day NPA norm will now not apply to the moratorium granted on existing loans by banks. RBI said the Liquidity Coverage Ratio (LCR) requirement for scheduled commercial banks (SCB) will be brought down from 100 per cent to 80 per cent with immediate effect. This will help banks maintain sufficient high-quality liquid assets in the wake of the economic crisis.
It has been decided to reduce the fixed reverse repo rate under liquidity adjustment facility (LAF) by 25 basis points from 4 per cent to 3.75 per cent, with immediate effect. This will help maintain more liquidity in the banking system.