RBI to infuse ₹3.74L Cr liquidity into financial system to tide over COVID-19 crisis

Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday (March 27) said around ₹3.74 lakh crore liquidity on aggregate basis will be infused into the financial system to deal with the COVID-19 pandemic.

Financial markets are under stress and require steps by the central bank for market stability and revival of economic growth, he said while announcing the decisions taken by the Monetary Policy Committee (MPC) here.

As part of liquidity infusion measures, he said, the RBI will undertake repo operation of up to ₹1 lakh crore to infuse liquidity into the market.

He also announced reduction in cash reserve ratio (CRR) of all banks by 100 bps to 3 per cent from 4 per cent, with effect from March 28 for one year.

“This is expected to release ₹1.37 lakh crore liquidity in the market,” he said. “CRR is the percentage of deposits that banks have to mandatorily keep with the central bank. RBI last reduced CRR on February, 2013, by 25 basis points.

In all, ₹3.74 lakh crore liquidity to be injected into system through the measures announced today,” he added. The governor also assured the public that the banking system in India was safe.

Related news: COVID-19 relief:₹50L insurance for healthcare staff, ration for poor

EMIs for term loans put on hold for the next three months

The RBI on Friday put on hold EMI payments on all term loans for three months and joined the government effort to rescue a slowing economy that has now got caught in coronavirus whirlwind.

RBI Governor Shaktikanta Das predicted a big global recession and said India will not be immune. It all depends on how India responds to the situation, he said. A global slowdown could make things difficult for India too, despite some help from falling crude prices, Das said, adding food prices may soften even further on record crop production.

The measures announced come a day after the government unveiled a Rs 1.7 lakh crore package of free foodgrains and cash doles to the poor to deal with the economic impact of the unprecedented 21-day nationwide lockdown.

While the Monetary Policy Committee (MPC) of the RBI originally was slated to meet in the first week of April, it was advanced by a week to meet the challenge of coronavirus.