Coronavirus Outbreak: RBI cuts repo rate by 75 bps, extends loan EMI payments, injects liquidity; key takeaways from Shaktikanta Das press conference

Shaktikanta Das, Governor, Reserve Bank of India, said the Indian banking sector is safe and sound. Depositors of commercial banks including pvt banks need not worry on the safety of their funds, he said in his press conference at 10 AM in Mumbai today. The meeting of the six-member MPC took place virtually, and for the first time outside its bi-monthly calendar since the committee was formed in February 2016. [caption id=“attachment_5717441” align=“alignleft” width=“380”]  File image of RBI governor Shaktikanta Das. News18[/caption] The RBI has injected liquidity of Rs 2.8 lakh crore via various instruments equal to 1.4 percent of GDP. Along with today’s measures liquidity measures equal to 3.2 percent of GDP, Das said. The RBI will take continuous measures to ensure liquidity in the system, he added. Click here to follow LIVE updates on coronavirus outbreak Das urged those with deposits in private banks to not indulge in panic withdrawal. The macros are stronger than what it was post-financial crisis, he said. The fiiscal deficit and CAD is much lower and inflation conditions are benign.”I remain optimistic despite current challenges. COVID-19 is upon us but this to shall pass. Stay clean, stay safe and go digital,” he signed off. Key takeaways

• Monetary policy committee voted 4:2 majority to cut 75 basis points to 4.4%
• Reverse Repo Cut more so that banks are incentivised to lend, disincentivised to hoard money
• RBI advances monetary policy committee meeting to 25-27 March

CRR cut by 100 bps

• Cash Reserve Ratio cut by 100 bps to 3 percent of NTDL with effect from 28 March, 2020
• Rs 1.37 lakh crore to be released into system because of CRR reduction
• A three-month moratorium is announced on payment of installments of loans outstanding on 1 March, 2020
• All banks including scheduled commercial banks, local area banks, small finance banks, regional rural banks, non-banking financial companies, housing finance companies permitted to allow a moratorium of 3 months on payment of installments as of March 1, 2020
• LTRO money can be invested in commercial paper, which will not be marked-to-market, and will be classified as held-to-maturity Banks may also reassess working capital cycle and will not be treated as non-performing assets
• Incremental capital conservation buffer implementation deferred from 30 March, 2020 to 30 September, 2020
• “The decision of MPC was warranted by disruptive force of Coronavirus,” says RBI Governor Shaktakanta Das. “We have quarantined 150 of our staff as part of our business continuity plan.

Lending cos, banks allowed to defer interest

• Investments will be classified as held to maturity (HTM), even in excess of 25 percent requirement. First auction of Rs 25000 crore will be conducted later on 27 March
• Lending companies, banks are allowed to defer interest on working capital repayments by three months. Banks may also reassess working capital cycle and will not be treated as non-performing assets
• Net Stable Funding Ratio (NSFR) was required to be introduced from 1 April, 2020. Will defer NSFR implementation to October, 2020
• Incremental CCB (capital conservation buffer) implementation deferred from 30 March, 2020 to 30 September 2020.