oppn parties RBI Is Trying Hard, But The Issue Has Escalated Beyond What It Can Do

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  • India becomes the first country in the world to make flashing of anti-tobacco warning on shows on OTT platforms
  • BJP says that by targeting PM Modi on his visits abroad, Rahul Gandhi is denting India's image
  • Nepalese Prime Minister PK Dahal Prachanda arrived in India on a 4-day official visit in whihc border issues and several others contentious issues will be discussed
  • Even as Home minister Amit Shah tours Manipur and holds peace talks, violence continues in the state after a lull of one day
  • PM Modi says that boycott of Parliament inauguration by some opposition parties was an insult to the nation
  • Allahabad HC upholds Varanasi district judge's order that petition for worshipping Shringar Gauri in Gyanvapi mosque is maintainable and can be heard
  • Rahul Gandhi says if PM Modi were to meet God, he is such a 'specimen' and know-all that he would start explaining to God how the universe functions
  • Deloitte raises flags in Adani Ports' dealing with three entities regarding disclosure of facts
  • Centre meets the fiscal target of 6.4% in FY23
  • Data released by NSO shows India's GDP grew at 6.1% in Q4 and 7.2% in the full year in FY23
  • IOC takes cognizance of police action on wrestlers, asks IOA to protect athletes
  • World Rapid Chess champion Magnus Carlsen says India is doing a lot of right things and will soon emerge as a powerhouse nation in chess with scores of talented youngsters
  • Thai Open badminton: PV Sindhu & K Srikanth ousted, but Kiran George stuns third seed Shi Yu Qi 21-18, 22-20
  • The lone Congress MLA in West Bengal, Bayron Biswas from Sagardihi, who won in a byelection recently, joins Trinamool, Congress says such 'poaching' not good for opposition unity
  • PM Modi says every move of his government is guided by the wish to improve the lives of the people
Excellent GDP growth: Q4 at 6.1% and FY23 at 7.2%, beats all estimates
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RBI Is Trying Hard, But The Issue Has Escalated Beyond What It Can Do

By Sunil Garodia
First publised on 2020-04-17 19:27:46

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.

The RBI governor held a press conference today to announce further measure to shore up the financial system that is burdened, like the rest of the economy, by the Covid-19 crisis. He announced a slew of measures like cutting the reverse reporrate by 25 basis points to make it 3.75%, releasing Rs 50,000 crore liquidity support for NABARD (Rs 25000 crore), Sidbi (Rs 15000 crore) and National Housing Bank (Rs 10000 crore), declaring that moratorium granted on existing loans by banks will mean that they would not fall under the 90-day non-performing asset norm, bringing down the liquidity cover ratio requirement of banks from 100% to 80%, and asking banks not to make any further dividend payouts until the situation improves.

While these are all good measures that will bring additional liquidity in the market and ease the situation a bit, the economy is now tottering on the edge and these macro measures are not going to help much. It is true that reducing the reverse repo rate will make it unattractive for the banks to park their money with the RBI and they will try to lend it to businesses. But since businesses are facing tough times, new projects or additions to existing projects will not happen in a hurry. Most firms will borrow now for only working capital needs as devoid of cash, many are finding it difficult to make payments for salaries, rents and other monthly expenses.

There is no doubt that these measures will ease the pressure on the financial system, but liquidity by itself is not the panacea for the troubles being faced by companies or individuals now. As the pandemic shows no signs of abating, the RBI would do well to extend the moratorium period from 90 days to 180 days. It should also direct banks not to charge usurious rates of interest for the delay as the situation is extraordinary and beyond the control of anyone. It should be recognized that this is not willful default but one that is forced by circumstances. Despite recent measures to restart some economic activity, the economy as a whole is not likely to return to any kind of normalcy before December, if not later. The RBI should keep that in mind when it announces any further relief measures.