Globally the businesses are going through a turmoil and the economic activity has reduced drastically. In these trying times where the business activity has come to a standstill, it was a demand raised by the businesses and industry of India to provide certain stimulus to help and assist them float and pass this difficult stage. The government and RBI has presented this stimulus for the businesses.
RBI Governor “GDP Growth for Q4 19-20 and FY 20-21 will get impacted and aggregate demand may weaken.”
1. The Monetary policy committee (MPC) met and decided to.
a. Cut the repo rate by 75 bps to 4.4% to mitigate impact of COVID 19.
b. Reverse repo rate also reduced by 90 bps to 4% so that banks lend more to the Industry.
2. Measures for injecting Liquidity
a. Auctions of Targeted Long Term Repo Operations upto 1 Lac Crore @ floating rate in primary and secondary market purchases into Investment grade instruments with no MTM requirement.
b. CRR reduced by 100 bps to 3% for period of 1 year.
c. Minimum daily CRR balance (one time) reduced upto June 2020.
3. Measures for Reducing Financial Stress
a. Monetarism of Term Loans announced for Banks, Financial Institutions for 3 Months EMI’s as on 1/3/20.
b. Deferment of Interest on Working capital facilities outstanding as on 1/3/20 for 3 Months.
c. All Banks and financial statements may defer all loan repayments by 3 months.
d. This would not be considered as default and no adverse impact on Borrowers.
e. Deferment of implementation of NSFR by 6 months.
f. Banks may reassess Working Capital measures.
These announcements are extremely welcome steps for Banks, Corporates and Industry in these difficult times. The above may result into injecting Rs. 3.74 Lac Crore of Liquidity which is about 3.4% of the GDP
With Kind Regards,
Vineet Rathi
#KrestonOPR #Kreston #Staysafe #Staypositive
