RBI Governor Speech Highlights 2020
RBI Governor Shaktikanta Das on May 22 addressed Press conference third time for the three months to reveal the decision about the rate cuts in order to revive growth and mitigate the impact of the coronavirus pandemic.
Focus of RBI:
- Keep financial system, financial markets sound, liquid and smoothly functioning
- To ensure access to finance to all, particularly those that tend to get excluded by financial markets
- To preserve stability
Important Announcements:
- Moratorium period for Loan extended to another three months
- Repo rate cut by 40bps
- Regulatory measures to support imports, exports, states
- GDP Growth of India in 2020-21 is estimated to remain in negative territory
- Headline inflation could stay firm in first half of 2020, but soften thereafter. If inflation trajectory evolves as expected, space will open up for more rate cuts.
- RBI allocates Rs.15000 crore for 90 days to EXIM banks to avail US dollar swap facility
- Rs.15000 crore facility created for SIDBI to be extended by another 90 days
- Extend time period for outward remittances for normal imports from 6 months to 12 months
- Maximum Permissible period of Pre shipment and post shipment credit- extended to 15 months from 1 year
- Group Exposure Limits of banks – increased to 30% from 25% of eligible capital base till June 30,2021
- Volume of world trade can shrink by 13-32% this year
- Industrial Production shrank is close to 17% in March with manufacturing activity down by 21%.
- Output of Core Industries contracted by 6.5%
- RBI permits banks to extend margins on working capital facilities to original levels by March 31
- Prices of Vegetables, Pulses, oil seeds, have emerged as pressure areas
- Forex Reserves- increased by $9.2bn since April 1 to $487 billion
- Metals, International crude oil prices and industrial raw materials likely to remain soft.
- Food grain production rose 3.7% to a new record
- Monetary Policy committee is expecting the inflation to fall below 4% in Q3 & Q4 of 2020.
Revised Rates:
| Policy Rates | New | Previous | Changes |
| Repo rate | 4% | 4.40% | 40bps |
| Reverse Repo Rate | 3.35% | 3.75% | 40bps |
| Bank Rate | 4.25% | 4.65% | 40bps |
| Cash Reserve Ratio | 3% | 3% | No change |
| Statuatory Liquidity Ratio | 18% | 18% | No Change |
| Marginal Standing Facility | 4.25% | 4.65% |
40bps |
Download RBI Governor Speech Highlights May 22, 2020 – PDF
RBI Governor Speech During Second Phase of Lockdown:
Introduction:
As we all know that India is in a second phase of Nationwide Lockdown to combat Corona virus, RBI Governor Shaktikanta Das addressed the media for a second time in COVID 19 pandemic with a new measures to boost liquidity, expand bank credit flow and ease financial stress.
Press Meet Updates:
- Reverse Repo rate is cut by 25 basis points to 3.75% from 4% while repo rate is unchanged in emergency measures to provide more relief to an economy fighting the fallout of Corona virus.
- Special Finance Facility of Rs.50,000 crore to be provided to Financial Institutions as below:
NABARD- Rs.25,000 crore
SIDBI- Rs.15,000 crore
NHB- Rs.10,000 crore
- Loans given by NBFCs to real estate Companies to get similar benefits as Scheduled Commercial Banks
- NPA classification for banks will exclude the moratorium period( 90 days)
- Liquidity boost through Targeted Long-term Repo Operations (TLTRO) 2.0 of Rs50,000 crore will be provided to benefit NBFCs and Micro finance Institutions
- The Government is expected to announce a financial relief package and relief measures to benefit workers, MSMEs, Service sector and other Industries
- The Funds availed by banks should be invested in Investment grade bonds companies and atleast half of the funds should go to small NBFCs and Micro Finance Institutions.
- IMF had predicted a growth of 1.9 percent in the current fiscal year and 7.4 percent in the next fiscal.
- RBI has brought down the Liquidity Coverage Ratio requirement of banks to 80% from existing 100% giving more liquidity to banks and it is to be restored in two phases from April 2021
- The RBI has also asked all banks to not make any dividend payments to shareholders due to the ongoing financial challenges.
- To Empower the states for adequate borrowing RBI has increased Ways and Means Advances ( WMA) by 60% to plan their market borrowings better. This facility will be available till September 30.
- Banks shall not make any dividend payments until further orders from RBI
- Redemption pressures faced by some mutual funds have moderated.
- Contraction in exports in March 2020 at 34.6% turned out to be much more severe than during the Global financial crisis.
- India’s foreign Exchanges Reserves continue to remain robust
Conclusion:
RBI will monitor the evolving situation continuously and use all its measures to address the challenges faced by pandemic. The main objective of this meet is to keep the financial system and financial markets sound, liquid and smooth functioning.
