The Reserve of India (RBI) Governor Shaktikanta Das issued latest initiatives to escalate liquidity and lessen the financial stree.
The Governor addressed to the public for the second time since the pandemic and declared a reduction in the reverse repo rate from 4% to 3.75%. The 25- basis- point cut proposal has been made to give a thrust to the banks so that they provide loans to the beneficial sectors of the country with the additional funds. A new Rs. 50,000 crore targeted long term repo operation (TLTRO) has been announced that would assist “small businesses, MSMEs, farmers and the poor” to overcome the aftermath of the ongoing pandemic. It will also be of great help to the states as their WMA (Way and Means Advances) limits has been elevated by 60%.
Financial institutions like NABARD, National Housing Bank and Sidbi have been notified with a refinancing window of Rs. 50,000 crore.
The scheduled commercial banks that have a stipulated 100 percent liquidity coverage ratio (LCR) have been minimised to 80 percent. The actions by the Central Bank has appreciably been able to create surplus liquidity in the banking industry.
Das reported that the inflation has already started shrinking and may further be down to the estimated 4% target by the central bank amidst the COVID-19 outbreak.
The RBI is keeping a close watch on the situation with an aim to run the financial zones effortlessly.
