New Delhi: Prime Minister Narendra Modi on Friday (April 17) hailed that steps takes by the Reserve Bank of India (RBI) and said it will greatly enhance liquidity and improve credit supply. During his address today, the RBI Governor announced a slew of measures to maintain adequate liquidity in system, facilitate bank credit flow and ease financial stress. The Bank cut the reverse repo rate and announced a slew of measures including re-finance window of Rs 50,000 crore and targeted long term repo auction of similar amount to deal with the impact of the COVID-19 pandemic.
The reverse repo rate cut will discourage banks from parking cash with the RBI and encourage them to lend to the economy.
Das assured that the RBI will use all instruments at its disposal to deal with the challenges posed by the outbreak of the novel coronavirus, depending on the evolving situation. He said there are a few slivers of brightness amidst the encircling gloom and hoped that India will stage a sharp V-shaped recovery in 2021-22 as projected by the International Monetary Fund (IMF).
The central bank also allowed states to borrow 60 per cent more via ways and means advance facility available and extended the increased limit until September 30. To preserve capital, RBI asked banks not to pay any further dividends for the fiscal year ended March 31. The dividend curbs will be reviewed in the quarter ending September 30.
The RBI had on March 27 announced a steep 75 basis points cut in the repo rate, slashed cash reserve ratio and permitted a three-month moratorium on all loans, including home loans, extended by commercial banks and lending institutions.
“Today’s announcements by @RBIwill greatly enhance liquidity and improve credit supply. These steps would help our small businesses, MSMEs, farmers and the poor. It will also help all states by increasing WMA limits,” PM Modi wrote on Twitter, shortly after RBI Governor Shaktikanta Das adressed media today.