RBI alleviating liquidity stress to offset Covid-19 impact on economy

Marco Green
July 11, 2020

Mr Das reiterated that since February 2019, the RBI has cut the repo rate by a total 250 basis points (2.5 percentage points).

RBI has also tweaked its priority lending norms for urban cooperative banks (UCBs) to ensure they lend more to sectors for which they were meant to lend to, Das said, adding that "special efforts" are being made towards identifying early risks for UCBs.

Das said that the RBI has undertaken a series of measures to mitigate the impact of Covid-19, but banks' minimum capital norms may not be enough to absorb losses.

Das added that even after the legally-backed resolution corporation is set up, RBI will have to remain vigilant and early warning signals and flag emerging risks.

On RBI policy, he said that the action for medium-term will require a careful assessment of how the crisis unfolds.

Das Saturday said the pandemic would result in "high NPAs and capital erosion".

Speaking on the Repo rate cut he said, "From February 2019 onwards, on cumulative basis, we had cut the Repo rate by 135 basis points till the onset of COVID19".

It is crucial to raise capital and build buffers to ensure credit flow and resilience, Das said. Calling coronavirus the worst health and economic crisis in the last 100 years during peacetime, India's top-most banker said the pandemic has hit jobs while also denting global supply chains and socio-economic conditions. The MPC has decided, as you would be aware, to cumulatively, cut the Policy repo rate by 115 basis points. "Indian economy has started showing signs of going back to normalcy after easing of restrictions", he said. The RBI Governor stressed the need for banks to focus on how to deal with the world post coronavirus.

Das, however, added that the Indian economy has started showing signs of normalcy easily in lockdown restrictions across the country, and post containment of COVID-19, a very careful trajectory has to be followed in orderly unwinding of countercyclical regulatory measures. He added that post containment of Covid-19, a very careful trajectory has to be followed in the orderly unwinding of countercyclical regulatory measures.

Other reports by Click Lancashire

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