The Reserve Bank of India (RBI) Governor Shaktikanta Das on Saturday reviewed the current economic situation, credit flows to different sectors of the economy and implementation of the three month moratorium on repayment of loan instalments with the chiefs of major public and private sector banks.
The meeting also took stock of the post lockdown credit flows including provision of working capital, with special focus on credit flows to MSMEs (micro, small and medium enterprises); monitoring of overseas branches of banks in view of the slowdown in economies across the globe; and stability of the financial sector.
An assessment of the flow of funds from banks, availing liquidity from the central bank under the targeted long-term repo operation (TLTRO) for investing in commercial papers, non-convertible debentures issued by Non-Banking Financial Companies (NBFCs), Micro Finance Institutions (MFIs), Housing Finance Companies (HFCs) and mutual funds, was made.
They also reviewed the standing liquidity facility for mutual funds that the RBI is providing via Banks. The Deputy Governors and other senior officers also participated in the meeting via video conference.
The Governor appreciated the efforts of banks in ensuring normal to near normal operations during the lockdown period, the RBI said in a statement.
The meeting comes in the backdrop of the central bank announcing a host of measures for dealing with the COVID-19 pandemic in two tranches (March 27 and April 17) for the financial sector.
The measures that have been announced by RBI include reduction in the policy repo rate by 75 basis points to 4.40 per cent from 5.15; introducing TLTROs for buying investment grade corporate bonds, commercial paper, and non-convertible debentures from NBFCs and MFs, a cut in the cash reserve ratio from 4 per cent to 3 per cent; a cut in the reverse repo rate from 4.0 per cent to 3.75 per cent; refinance for all India financial institutions.
Bankers have turned risk averse,fearing the lending decisions they take in the current cycle of slowdown and lockdown could turn non-performing later on.