With many government institutions stepping up and issuing some relief measures for the people, the Reserve Bank of India (RBI) has also issued a statement to make people’s lives easier. In order to mitigate the impact of the outbreak and rapid spread of the COVID-19 epidemic on Indian economy, the RBI announced that all banks and Non-banking Financial Companies (NBFCs) may allow a 3-month moratorium on payment of EMIs of terms loans. Moratorium is a legally authorized period of delay in performance of legal obligation or the payment of a debt.
There is also relief for people availing cash credits and over draft facilities, basically businesses. The RBI has allowed a deferment of 3 months on payment of interest on such working capital facilities provided by banks. The accumulated interest is to be paid after expiry of deferment period.
RBI also reduced the cash reserve ratio in banks. The statement reads, “As a one-time measure to help banks tide over the disruption caused by COVID-19, it has been decided to reduce the cash reserve ratio (CRR) of all banks by 100 basis points to 3.0 per cent of net demand and time liabilities (NDTL) with effect from the reporting fortnight beginning March 28, 2020.”
“Another dispensation has been allowed to banks, “Furthermore, taking cognisance of hardships faced by banks in terms of social distancing of staff and consequent strains on reporting requirements, it has been decided to reduce the requirement of minimum daily CRR balance maintenance from 90 per cent to 80 per cent effective from the first day of the reporting fortnight beginning March 28, 2020. This is a one-time dispensation available up to June 26, 2020.”
Some other measures taken by RBI include reducing repo rate by 75 basis points to 4.4% and reverse repo rate reduced by 90 basis points to 4%. RBI will conduct auctions of Targeted Long Term Repo Operations of 3 year tenure for a total amount of Rs. 1 Lakh crore. These measures are expected to inject liquidity worth Rs. 3.74 lakh crores. The RBI Governor assured people that banking system is safe and urged them not to resort to panic withdrawal of funds.
The RBI pree release can be read here
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