On Friday, addressing a press conference, the Reserve Bank of India directed the banks to grant a 3-month relief to EMI installments on all term loans. This comes after the Finance Ministry had urged the Reserve Bank to give EMI relief following the fall out of economy due to COVID-19.
A day after the Finance Minister announced relief packages for the poor, the details of the Reserve Bank of India’s meeting that took place between the 24th of March and the 27th of March were made public.
In its statement, the Reserve Bank directed all nationalized Banks, co-operative banks, all-India Financial Institutions, and NBFCs to allow a moratorium of three months to all terms loans as on March 1st, 2020. The repayment schedule and the subsequent dates will be pushed further accordingly.
The move has put the onus on the banks to pass on the benefit to people who have been economically hit or lost jobs because of the COVID-19 outbreak. Apart from allowing the banks to defer interests on working capital repayments, the Reserve Bank of India has also allowed the banks to reassess the working capital cycle and ensured that they won’t be treated as non-performing assets.
No Need to Panic
Governor Shaktikanta Das cautioned that the pandemic would eventually push the global economy into recession but also assured that the government has taken good measures. He also said that fighting the coronavirus is the top priority now.
The Reserve Bank has also decided to reduce the Cash Reserve Ratio of all banks by 100 basis points. The Cash Reserve Ratio is the amount all banks need to mandatorily deposit into the Reserve Bank. As per the Governor, this would release the liquidity of Rs 1,37,000 crores with the banks.
As closing comments, Das promised the people of India that the Indian Banks are safe and squashed any sorts of panic. He specifically said that the depositors of commercial banks need not worry because of the pandemic.
The COVID-19 is bound to break the economy. However, it is not exclusive to India. According to government data, India’s economic growth has slipped to a seven-year-low at 4.7 percent in the last quarter of 2019.