How is the RBI handling the great lockdown?

The Reserve Bank of India is the key bank or the central bank of India it is the issuer of the Currency in India as well as the chief regulator of all the banks in India…not only this but it has huge wok portfolio including balancing and safeguarding of the economy…Now as we are amidst the most difficult time of this century…as the pandemic called as Covid-19..has disrupted not only the human lives.. but also the economy of the nation and as RBI being the chief bank has enormous amount of responsibilities to tackle the situation.. specially during the current lock down conditions..

And here are some key actions that have been taken by the RBI with the consultation of Central Government…to tackle this menace..

1- RBI has available cheaper cash for the lenders and also encouraged banks to lend it to the needy sectors… actually RBI was quite alerted and it started to work on these things even before lockdown was announced..like on February 6, it was announced that banks don’t need to set aside cash reserves for loans given to small businesses between January 31,2020 to July 31, 2020 or for credit to help consumers buy a car or home.

2- One of the key decision that RBI made was. about the lending rates of the banks — the repurchase rate — was cut by 75 basis points (bps) in a single move this year. However, the effective deposit rate has been slashed by 115 bps to discourage lenders from playing safe and parking the cash with the RBI…Cash reserve Ratio was also reduced to 3% from 4% before-handly…also the Liquidity Coverage Ratio was lowered to 80% from 100% )

3 -For giving major and much needed relief to consumers/customers of the bank.. RBI proposed the loan freezing… as per the announcement..All lenders can freeze repayments for three months on term loans outstanding March 1,2020.

4 -Lenders allowed to suspend interest payments on working capital facilities for three months; accumulated interest can be paid later and the loans won’t be in default…these steps add to previous measures which allow a one-off restructuring of loans to small businesses that were in default as of January 1,2020.

5- Also loans to commercial property projects that are delayed for reasons beyond the control of the developer are allowed to be treated as standard for another year.

6-RBI also differed the Implementation of stricter regulations as Rules requiring banks to fund their activities through stable sources has been deferred to October 1 from April 1..along with that Completion of capital conservation buffer pushed to September 30 from March 31,2020.

7-Lenders were allowed an additional 90 days to reach a resolution plan on large accounts in default.

8 Not only this but RBI also provided the much-needed Special windows..which include support for corporate borrowers as well as rural industry. Till date RBI has provided two such windows..

A- TLTRO (TARGETED LONG TERM REPO OPERATION)1.0: Rs 1 lakh crore of targeted long term funds from the central bank to banks for investing only in corporate bonds, aimed at easing cash crunch at firms (on April 15, RBI announced new rule capping the exposure of any bank to a single entity at 10% of TLTRO funds invested).

* TLTRO (TARGETED LONG TERM REPO OPERATION) 2.0: Initial Rs 50,000 crore targeted at shadow lenders specially for the mutual fund industries (After the sudden closure of 6 debt fund schemes by Franklin Templeton India), with at least half going to lower rated firms (announced on April 17).

So from above we can see that RBI has done a lot to provide the much needed stimulus to the Indian economy in general and it’s various sectors in particular..it is also worth mentioning that RBI nowadays is quite active as well as responsive..as it provides all needed help to different industries as per the requirements..be it the case of Yes Bank or the recent chaos in mutual fund schemes.. RBI has taken the right inciative at the right time….and hopefully it’s steps taken during this Covid-19 will also bring some positive response…