Mumbai: India is expected to post a sharp turnaround in 2021-22. This was disclosed Friday by Reserve Bank of India (RBI) Governor Shaktikanta Das who quoted IMF projection amid the COVID-19 crisis. The IMF projection of 1.9% GDP growth for India is highest in G20, Das said.
Shaktikanta Das said that the RBI is also monitoring the situation developing out of the COVID-19 outbreak closely. Banks, financial institutions have risen to occasion to ensure normal functioning during outbreak of pandemic.
The RBI governor also said that contraction in exports in March stood at 34.6 per cent. It is much more severe than global financial crisis of 2008-09. Automobile production and sales declined sharply in March. The demand for electricity also decreased drastically, Das pointed out.
Repo rate reduced by 25 basic points
Das informed that the central bank will ensure adequate liquidity in the system to ease the financial stress caused by the COVID-19 pandemic. RBI said that it is reversing the repo rate – the rate at which banks park their fund with the central bank – by 25 basis points to 3.75 per cent. This will encourage banks to lend to the productive sectors of the economy.
With regard to other measures, Das said RBI will begin with giving an additional Rs 50,000 crore through targeted long-term repo operation (TLTRO) to be undertaken in tranches. Besides, he announced a re-financing window of Rs 50,000 crore for financial institutions like Nabard, National Housing Bank and Sidbi.
Banks not to make any dividend payment amid COVID-19 stress
Providing relaxation to lenders, the RBI also said that banks shall be exempted from making dividend payment in the light of financial difficulties posed by the COVID-19 pandemic.
Making a slew of announcement to ease the pressure on financial sector, Das said that the 90-day norm will not apply on moratorium granted on existing loans by banks. To maintain financial health, he said, banks have been exempt to make any further dividend payout in view of financial difficulties arising from COVID-19.
On the inflation front, Das said CPI based inflation has declined in March and it is expected to ease further. RBI will take advantage of the falling price situation and pass on benefit to borrowers, he hinted
Agencies