RBI steps to help mitigate impact of coronavirus lockdown on biz: Industry

A slew of measures announced by the RBI on Friday would help mitigate the impact of coronavirus-related lockdown on businesses, the industry said.

The industry said that the steps would help push lending rates down, encourage banks to infuse money into productive sectors, infuse liquidity and address the financial stress in the system.

The RBI on Friday allowed banks to put on hold EMI payments on all term loans for three months and cut interest rate by the steepest in more than 11 years as it joined the government efforts to rescue a slowing economy that has now got caught in coronavirus whirlwind.

The Reserve Bank of India (RBI) cut repo to 4.4 per cent, the lowest in at least 15 years. Also, it reduced the cash reserve ratio maintained by the banks for the first time in over seven years. CRR for all banks was cut by 100 basis points to release Rs 1.37 lakh crore across the banking system.

The current situation in the economy and financial markets is extremely fragile and it required a massive dose of monetary stimulus to be injected at the earliest. The RBI has done just that. This should help lift the spirit of economy, " Ficci President Sangita Reddy said.

"This, together with a host of other measures to boost liquidity will address the financial stress in the system on account of the COVID-19 outbreak and the consequent lockdown. The substantial reduction in the CRR will help banks to reduce their lending rates and aid monetary transmission, " CII Director General Chandrajit Banerjee said.

Assocham President Niranjan Hiranandani said these measures, including reducing the cost of borrowing and reduction in the CRR would ensure India's financial stability at a time when there is heightened volatility in the global financial markets, with a desperate rush towards security.

Cyril Shroff, Managing Partner at Cyril Amarchand Mangaldas said: "The RBI has unleased a bazooka to deal with the economic pain and uncertainty prevailing in the wake of the COVID crisis. Acting swiftly and decisively, the RBI has used several levers to increase liquidity in the system".

PHD Chamber President D K Aggarwal said these measures will provide adequate liquidity in the system, bring down the cost of capital and mitigate the impact of pandemic COVID-19.

The reverse repo rate was cut by 90 bps to 4 per cent, creating an asymmetrical corridor.

RBI Governor Shaktikanta Das predicted a big global recession and said India will not be immune. It all depends how India responds to the situation, he said.

Global slowdown could make things difficult for India too, despite some help from falling crude prices, Das said, adding food prices may soften even further on record crop production.

Aggregate demand may weaken and ease core inflation further, he noted.

After cutting policy rates five times in 2019, the RBI had been on a pause since December in view of high inflation.

The measures announced come a day after the government unveiled a Rs 1.7 lakh crore package of free foodgrains and cash doles to the poor to deal with the economic impact of the unprecedented 21-day nationwide lockdown.

While the Monetary Policy Committee (MPC) of the RBI originally was slated to meet in the first week of April, it was advanced by a week to meet the challenge of coronavirus.