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Major RBI Measures to Rescue Indian Economy amidst COVID-19 crisis

Major RBI Measures to Rescue Indian Economy amidst COVID-19 crisis

In the present unprecedented times, RBI (Reserve Bank of India) took several policy measures and financial tools method to revamp the slowing economy amid COVID-19. RBI is using various conventional and non-conventional methods to bring back the Indian economy on track. The coronavirus induced crisis has given major hiccups to the economy due to a lockdown extension and rising number of COVID-19 positive cases in India.

In order to absorb the shock of downturn in the economy amidst the COVID-19 pandemic, RBI has bought a whopping $9.1444 billion US dollars on a net basis in the month of February. According to the RBI data released recently, RBI had bought $10.604 billion US dollars and sold $1.460 billion in the cash market. However, in February last year, RBI had bought $2.086 billion and sold $1.261 billion of US currency. With the intention of providing more cushion from rupee value depreciation in the money market, RBI is on its continuous spree of buying international currency. In the month of January, RBI had bought $11.486 billion dollars of the greenback and sold $1.22 billion in the cash market.

To increase the liquidity in the market, RBI had bought the government of India securities under Open Market Operations (OMOs) for an aggregate amount of INR 30,000 crore in two tranches of INR 15,000 crore each in the month of March.

The RBI has increased the borrowing limits under WMA (Ways and Means Advances) facility by 30 percent from the existing limit of all states and union territories to mitigate the risk of coronavirus pandemic.

To ease the capital inflow from banks and outflow of cash from loan payers amidst coronavirus crisis and extended lockdown, RBI has provided 3-months of moratorium on EMI repayment. It has a positive impact on real estate home buyers who are unable to repay their mortgage amid crisis period.

Multiple reductions in repo and reverse repo rates in the last six months by the central bank of India has supported the financial market to undermine the effects of coronavirus crisis. It will make home loan interest rates comparable to levels of 2008, where boom in the residential market was witnessed due to lower interest rates.

The RBI has infused around INR 1 lakh crore of funds into the banking system through TLTRO (Targeted Long-Term Repo Operation) so that companies would not suffer in a stumbling economy. Emphatically, some of the big lenders of the real estate industry, namely, HDFC (Housing Development Finance Corporation), HUDCO and NHB (National Housing Bank) have raised funds from the first tranche of INR 25,000 crore under TLTRO facility. These funds raised by financial institutions will usher growth in the real estate and ease liquidity inflows.

 

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