Terming the RBI policy announcement as bold, decisive and compelling, State Bank of India (SBI) Chairman Rajnish Kumar on Friday said the monetary stimulus will address the credit needs of the real economy. Observing that the India economy is going through a crisis, he said that the Reserve Bank of India's decision to reduce the cost of borrowing and infusing liquidity will help financial markets stabilise and lead to immediate rate transmission.
"The RBI policy announcements are bold, decisive, compelling and with a humane touch in attenuating to the needs of the economy to fight through the pandemic," the SBI chief said.
He said that the bazooka of conventional cash reserve ratio (CRR) cut by 100 bps and unconventional liquidity measure of incentivising banks will lift the spirit of financial market.
"The large rate cut, the adjustment in capital conservation buffer, the moratorium on repayments and the bazooka of conventional cash reserve ratio (CRR) cut and unconventional liquidity measure of incentivising banks to support capital market - all will help financial markets stabilise, lead to immediate rate transmission and address the credit needs of the real economy," Kumar said.
Given that we are in exceptional times, RBI has played the role of championing the cause for the economy and financial system, he added.
Commenting on the moratorium on bank loans, Kumar said that all equated monthly installments (EMIs) on term loans will automatically be suspended for three months. "Installments will get automatically deferred by 3 months for term loans and customers don't have to apply to banks for it," he said.
He further stated that banks can formulate their own policies on new loans keeping in mind borrowers' repayment capacity.
In the policy announcement, the RBI Governor Shaktikanta Das announced that all banks, lending institutions have been permitted to allow a three-month moratorium on all loans to provide relief to customers amid the coronavirus lockdown.
He also announced a 75 basis points (bps) cut in repo rate along with 90 bps reduction in reverse repo rate to offset the impact of coronavirus pandemic on the economy. The cash reserve ratio (CRR) of all banks has also been reduced by 100 bps to 3 per cent of net demand and time liabilities (NDTL) with effect from fortnight beginning March 28, 2020 for a period of one year.
These policy measures are likely to inject Rs 3.74 lakh crore liquidity in the system and will allow the banks to release money into the economy and help their ability to raise capital, the RBI chief said.
By Chitranjan Kumar