Central Bank (RBI) Measures to Support the Economy and Facilitate Lending

On November 9, 2016, an Indian Navy officer passed the logo of the Reserve Bank of India (RBI), India’s central bank, in Mumbai.

Punit Paranjpe | AFP | Getty Images

Bank stocks in India soared on Wednesday after the central bank introduced measures to boost lending as the coronavirus crisis continued to hurt India.

The Nifty Bank index rose 1.35%, while the Nifty PSU index, which captures the performance of Indian public sector banks, rose 1.8%.They exceeded the benchmark Nifty 50, An increase of only 0.7%.

The share of major lenders soared after the announcement and has since given up some profits. Bank of Baroda It was a 2.63% higher deal, IndusInd Bank 2.51% added, HDFC Bank It increased by 1.47% and Axis Bank increased by more than 2%, State Bank of India Advanced 1.28%.

RBI Announces Measures to Promote Lending

The Reserve Bank of India will monitor the economic impact of India’s second wave of Covid-19 infection and deploy all possible resources to relieve economic stress, Shaktikanta Das said unscheduled Wednesday. Said in the speech.

He announced plans to inject liquidity of Rs 500 billion ($ 6.78 billion) to facilitate access to emergency medical services. The move will allow commercial banks to borrow money from central banks through repo transactions and lend them to Covid-19 affiliates.

To facilitate the provision of immediate liquidity to enhance domestic Covid-related healthcare infrastructure and services, the central bank has reporated Rs 500 billion ($ 6.78 billion) over a period of up to three years. Opens the liquidity window of. It will be available until March 31, 2022, according to Das.

Repo rate is the main lending rate that RBI lends to commercial banks. Currently it is 4%.

Under this scheme, Das will provide new loans to various companies and organizations, including vaccine manufacturers, vaccine and Covid-related drug importers and suppliers, and oxygen and ventilator manufacturers and suppliers. I explained that I can provide.

According to the central bank governor, banks can lend to borrowers either directly or through intermediary financial institutions regulated by the central bank, and lenders are expected to produce a “Covid loan book” under this scheme.

The RBI has also announced other steps aimed at helping Indian SMEs and financial institutions at the “biggest brunt” grassroots level of the second wave of infection. This includes allowing certain smaller borrowers to extend their repayment period. However, only if you did not rebuild your loan last year and it is classified as a “standard” account as of March 31st.

Uncertain economic recovery

South Asian countries are now facing a catastrophic second wave, with some states blocking and others tightening social restrictions. on Tuesday, India surpasses 20 million Covid-19 cases And the official death toll has exceeded 222,000.

Economist warned The ongoing crisis is likely to delay India’s economic recovery. Last year, a two-month blockade hindered growth and pushed the South Asian economy into a technological recession.

Local media coverageBanks have given RBI bailouts to help borrowers fight the second wave of Covid-19 and provide bailouts to lenders’ balance sheets, given the potential for a surge in bad debts, sources said. He said he was looking for it.

Das also virtually met with the CEOs and managing directors of selected non-bank financial institutions and microfinance institutions on Monday, among other things, among others. Potential stress on the balance sheets of those companies..

India’s central bank finally lowered its repo rate May 2020 During an emergency meeting to counter the economic downturn from the moon’s national blockade.

RBI reduced its benchmark lending rate by 40 basis points in May last year, 75 basis points in March, and 115 basis points in 2020. In 2019, the central bank reduced 135 basis points.

Central Bank (RBI) Measures to Support the Economy and Facilitate Lending

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