Key Take Away From RBI's Das Address Amid Covid 19 Pandemic

In his address to mitigate the fall-out due to Covid 19, RBI's Das has taken the following steps:

Also he says that as the situation warrants the RBI will take on the challenges that come up-

Reverse Repo Rate Cut By 25bps To 3.75%

• Maintain liquidity in the system
• Facilitate & incentivise bank credit flows
• Ease financial stress
• Enable formal working of markets

1. Liquidity measures:

A special TLTRO for Rs. 50,000 crore to be paid in tranches for MFIs as well as NBFCs and this can be stepped up if required by a particular institution.

At least 50 percent of the amount must go to the mid and small-sized NBFCs and MFIs. Exposure in this facility will not be reckoned under the large exposure framework. TLTRO 2.0 investments may be classified as HTM (held to maturity)," RBI governor said.

2. Refinancing window extended to housing finance companies:

Of Rs. 50,000 crore, Rs. 25000 crore will be going to and Rs 15,000 crore to SIDBI and 10,000 crore to NHB.

3 Reduction in Reverse repo rate:

Reverse repo rate has been cut by 25 basis point to 3.75% while key repo rate remains unchanged at 4.4%. This is an incentive for banks to lend. The step will see to credit growth being faced as of now.

4. Moratorium period to be excluded from 90-day NPA period:

For all the accounts extended moratorium, 90-days NPA classification rule shall not be applicable. Also for the period, banks will need to maintain 10% provisioning.

Period of resolution plan for NPAs to be extended by 90 days. Also, banks will maintain higher provision at standstill, which can be adjusted later for actual slippages, RBI said.

5. NBFCs allowed to grant relaxed NPA classification to their customers.

6. LCR or liquidity coverage ratio requirement for banks has come down to 80% from 100% with immediate effect:

This shall be restored to 90 percent by October 2020 and 100 percent by April 2021, RBI said.

7. Banks and cooperative banks to not come out with dividend pay out

8. Increase in WMA limit :

Ways and means advances (WMA) limit of state governments was increased by 60 % and it shall be available till September 30, 2020.

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