The Bangalore Chamber of Industry and Commerce (BCIC) welcomes the Hon'ble RBI Governor's announcement this morning to provide liquidity and stability measures to boost additional liquidity in the country’s financial system, making more funds available to the banking system so as to revive growth once businesses resume their operations and also provide stability in the interim.
At BCIC, we are extremely happy to note that our proposal to reduce the Repo rate and reduction of CRR has been implemented by RBI.
Some of the key highlights of RBI Governors press conference:
(*)Repo Rate reduced by 75 basis points to 4.4% so that banks can lend at a reduced interest rate
(*)Cash Reserve Ratio (CRR), reduced from 4% to 3% (100 basis point) for one year so as to release 1.37 Lakh Cr to the banks, which now is additionally available for them to lend to business and public.
(*)Minimum daily CRR balance reduced from 90% to 80% till 30th Jun’20. These measures will inject 3.74 Lakh Cr liquidity in the market.
(*)In respect of working capital facilities sanctioned in the form of cash credit, overdraft, lending institutions are allowed to recalculate drawing power by reducing margins or by reassessing the working capital cycle for borrowers.
With the above measures, Lending institutions can allow:
>A moratorium of three months on repayment of instalments for Term Loans outstanding as on 1st March 2020
>Deferment of three months on payment of Interest w.r.t all such working capital facilities outstanding as of 1st March 2020
>Deferring payments will not result in asset classification downgrade and also all measures taken not to impact credit history.
We expect that all the lending institutions - the commercial banks, NBFC’s etc. will immediately pass on the benefit to industrial and business houses so that the enhanced liquidity measures are fully utilised to safeguard and revive growth by utilising the excess liquidity and reduce their borrowing costs so as to sail over the unprecedented and difficult times.
With time and based on RBI’s monitoring of the current situation, we expect more from RBI in the coming day.