Gadkari, Goyal hail RBI measures to prop up coronavirus-hit economy

New Delhi, Apr 17 () Union Minister Nitin Gadkari on Friday said that "bold and forward looking" policy interventions by the RBI shall provide a much-needed boost to the economy.

Other Cabinet ministers Piyush Goyal and Smriti Irani too hailed the measures, saying these steps would ensure adequate liquidity, ease financial stress and steer India's emergence as a world leader in the post COVID-19 scenario.

The Reserve Bank of India (RBI) cut the reverse repo rate and announced a slew of measures including re-finance window of Rs 50,000 crore and targetted long term repo auction of similar amount to deal with the impact of the Covid-19 pandemic.

Besides, it has been decided that the NPA classification norms will exclude the 3-month moratorium window that banks are allowed to give on loan repayments, to ease the worries of micro, small and medium enterprises (MSMEs) that are in danger of becoming bad loan accounts.

"I specially thank RBI for their special focus on MSME and providing 50,000 cr for refinancing of MSMEs through SIDBI, NABARD & NHB. The extension of loan classification to 180 days for stressed assists shall address to NPA's issue, " the Minister for MSME and Road Transport and Highways Gadkari tweeted.

In another tweet, he said: "State governments are under severe liquidity crunch, increasing of WMA limit by 60 per cent shall help state governments garner more resources".

Commerce and Industry Minister Goyal also took to micro blogging site Twitter to express his views on the FBI's announcements.

"Given the visionary steps taken under the leadership of PM @narendramodi ji to protect the lives of the people, today's steps by RBI to support the economy will provide liquidity for growth & help India emerge as a world leader in a post COVID-19 world," Goyal tweeted.

He said the exclusion of moratorium period from 90 days NPA norm will help borrowers, while simultaneously the health of banks is being maintained through 10 per cent higher provisioning and stopping dividends for the year.

Union Minister for Textiles and Women and Child Development Irani tweeted that the "announcements aimed at ensuring adequate liquidity, facilitating bank credit flows & enabling normal functioning of markets, will significantly ease financial stress & eventually strengthen India's growth & progress".

The central bank's Governor Shaktikanta Das assured that RBI will use all instruments at its disposal to deal with the challenges posed by the outbreak of the novel coronavirus, depending on evolving situations.

This is not the last of the announcements, and based on evolving situations, the central bank will come up with responses in the future in the interest of the economy, he said.

In a video message, Das said in order to encourage banks to deploy the surplus funds in investments and loans in productive sectors of the economy, it has been decided to reduce the fixed rate reverse repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 4 per cent to 3.75 per cent with immediate effect.The reverse repo rate is the rate banks earn by parking deposits with the RBI.

Surplus liquidity in the banking system has risen significantly in the wake of government spending and the various liquidity enhancing measures undertaken by the RBI, Das noted.

He also said that it has been decided to conduct targeted long-term repo operations (TLTRO 2.0) for an aggregate amount of Rs 50,000 crore, to begin with, in tranches of appropriate sizes.

Das announced special refinance facilities for a total amount of Rs 50,000 crore to Nabard, Sidbi and National Housing Bank (NHB) to enable them to meet sectoral credit needs.

To provide greater comfort to the states for undertaking Covid-19 containment and mitigation efforts, the RBI announced a 30 per cent increase in the ways and means advances limit.

It has been decided that in respect of all accounts for which lending institutions decide to grant moratorium or deferment, and which were standard as on March 1, 2020, the 90-day NPA norm shall exclude the moratorium period, i.e., there would an asset classification standstill for all such accounts from March 1, 2020 to May 31, 2020.

Pointing out that the RBI is monitoring all macro parameters on a continuous basis, he said, economic activity has come to standstill during lockdown.

The impact of Covid-19 is not captured in the index of industrial production (IIP) data for February, he said, adding that the contraction in exports in March at 34.6 per cent is much more severe than global financial crisis of 2008-09. RSN MKJ