Reserve Bank of India (RBI) governor Shaktikanta Das addressed the media on Friday. Governor's address comes after Finance Minister Nirmala Sitharaman annouced a Rs 1.07 lakh crore stimulus package for the poor on Thursday amid the coronavirus outbreak.
Addressing the media, Das said that RBI advanced the monetary policy committee meeting to March 25-27 and voted 4:2 majority to cut repo rate.
Das said that the repo rate has been reduced by 75 basis points to 4.4.% and the reverse repo-rate has reduced by 90 basis points to 4% in order to facilitate the econmomy during the coronavirus outbreak.
"India has locked down economic activity. Keeping finance flowing is the paramount objective of the RBI. India has locker down economic activity and financial activity is under severe stress," says Shaktikanta Das.
"MPC (Monetary Policy Committee) noted that global economic activity has come to a near stand-still as coronavirus related lockdowns & social distancing in affected countries. Expectations of a shallow recovery in 2020 from 2019's decade low in global growth have been dashed," says Das.
Further, RBI has decided to reduce the Cash Reserve Ratio (CRR) of all banks by 100 basis points to 3% of Net Demand and Time Liabilities with effect from the fortnight beginning March 28 for a period of one year.
RBI will conduct auctions of long term repo operation (LTRO) of three-year tenure upto Rs 1 lakh crore at a floating rate linked to policy rate, said RBI.
Das said that the measures put in place will result in total liquidity injection of Rs 3.74 lakh crore to the system.
Mitigating debt servicing burden to prevent transmission of financial stress to the real economy, provide relief to borrowers. A three month moratorium has been announced on payment of installments of loans outstanding on March 1, 2020, says Das.
The governor also said that RBI has injected liquidity of Rs 2.8 lakh crore via various instruments equal to 1.4% of GDP since the last policy in February.
Offshore Rupee NDF Market has been growing rapidly. Net Stable Funding Ratio (NSFR) was required to be introduced from April 1, 2020 which will now be deferred to October, 2020, said Das.
He also said that all banks and lending institutions may allow a 3-month moratorium on all loans and moratorium on term loans, deferment of interest payment will not result in asset classification downgrade.
He also assured that the Indian banking system is safe and the depositors of commercial banks including private banks need not worry about the safety of their funds.
(With inputs from Sanjay Jog)