rbi policy today: RBI is done keeping its powder dry as India brings out heavy artillery to fight virus
Das said the RBI will continue to remain very vigilant and will do whatever it takes to support the economy in these desperate times.
The rescue measures implemented today by the RBI capped a frenetic couple of days of big-ticket action on both monetary and fiscal fronts, as Indian authorities brought out the heavy artillery for an assault on coronavirus during the first two days of the nationwide lockdown.
FM Nirmala Sitharaman had yesterday announced a Rs 1.70 lakh crore mega rescue package for the country’s poor. This, combined with today’s RBI moves that will eventually release Rs 3.74 lakh crore of liquidity into the system, forms the frontline of India’s response to the menace.
Here is a look at how India is front-loading its countermeasures — the top moves that could make a difference as the country tries to keep itself afloat in the face of an economy killer.
Big breather for consumers, businesses, banks
No EMI is required to be paid on outstanding term loan for the next three months. This is applicable to home loan, car loans, personal loans and corporate loans. Credit cards, however, don’t qualify for this moratorium.
This is going to be a big breather for small- and medium-sized business. Besides, because delayed payment won’t be classified as NPAs, the move will also help banks.
Importantly, not paying EMI for three months will not hit credit scores of borrowers. EMIs will resume after the moratorium period gets over.
This 3-month moratorium will prevent a situation where loss of income makes a large number of EMI payers insolvent at the same time.
More liquidity, easier rates
Following today’s sharp cut, the benchmark repo rate — the rate at which RBI lends money to banks — now stands at its lowest ever. A lower repo rate essentially means that banks have more cheap money to lend to customers, at lower interest rates. This policy tool can make a significant difference in cases where liquidity in the system is low.
The repo rate after the cut stands at 4.4%. The RBI also brought down the rate at which it borrows funds from commercial banks — reverse repo. This move means lower interests on idle cash of banks, which could push them to lend more. In short, yet more liquidity injection into the system.
Booster shot for the poor
From free cereals to free cooking gas and ex-gratia payouts for various sections, Sitharaman’s Rs 1,70,000 lakh crore economic rescue plan left few of the poor untouched.
Together with the govt’s offer to foot workers’ PF bills for three months, Sitharaman’s freebies are likely to help the poor deal with the fallouts of coronavirus outbreak.
Shout-out to frontline fighters
In an acknowledgement of the contribution of frontline fighters such as doctors, nurses, paramedics and ASHA workers, Sitharaman’s rescue plan introduced an insurance cover for health workers.
Following this, around 2 million healthcare workers will be entitled to a Rs 50 lakh cover.
“The most reassuring move”
Das said the RBI will continue to remain very vigilant and will do whatever it takes to support the economy in these desperate times. This will be done, he insisted, through both conventional and unconventional instruments.
According to Shanti Ekambaram, Group President, Consumer Banking, Kotak Mahindra Bank, this was the most reassuring part in RBI’s firefighting plan.