RBI Governor Shaktikanta Das held a meeting with the heads of public and private sector banks on Saturday 2nd of May, 2020 in two different sessions through video conference to discuss on the various issues to reduce the stress in the financial system among the pandemic of corona-virus and review of the current economic situation were also discussed.
Credit flows to different sectors of the economy, liquidity to NBFCs, Micro Finance Institution, Mutual Funds, the implementation of three months moratorium on loan repayment, and Housing Finance Companies are some measures which were discussed in the meet.
RBI has also taken several steps to push in money into the economic system but smaller and mid-sized NBFCs and Micro Finance firms said they were left out.
During the meeting, the RBI Governor respects the efforts of banks in ensuring normal to near normal functions during the lockdown period.
There have also been dips in credit off-take as the economy comes to a standstill between lockdown. In the ending April 10, banks’ cumulative non-food credit reduces by ₹ 33,872 crores to ₹ 102.9 lakh crore.
“The low credit disbursement is not because of risk aversion,” State Bank of India NSE 0.21% Chairman Rajnish Kumar later said in an interview to ET Now. He said that credit delivery is a factor of how fast the economy recovers and demand are generated.
The Supreme Court directed the RBI earlier this week to ensure that its March 27, 2020 guidelines directing lending institutions to allow a three-month moratorium to all borrowers is implemented in letter and spirit.
In the financial crisis, the RBI has taken several steps over the weeks to relieve the force faced by borrowers, lenders, and mutual funds and assured to take more measures to deal with the growing situation.
Since February 2020, monetary policy meetings to tackle the liquidity situation the RBI has injected 3.2 % of GDP in the economy.
The RBI has been encouraging banks to push lending by cutting its key policy rate by 75 basis points to eleven years low of 4.4%. Besides, it also slashed the reverse repurchase rate to 3.75% to encourage banks to establish surplus funds within the system towards lending.
The reverse repo rate cut will disappoint banks from parking cash with the RBI and inspire them to lend to the economy.
The Indian economy may be headed for a rare quarterly contraction during the first quarter of 2020-21 as economic activities have come to a freeze due to the pandemic of corona-virus lockdown.
The government had earlier disclosed a ₹ 1.7 lakh crore package of free food grains and cash to the poor to deal with the challenges posed by the outbreak of COVID-19 pandemic.