On Marc 27, Das announced a Rs 3.74 lakh crore (1.8% of GDP) package, which included Targeted Long-Term Repo Operations (TLTRO) worth Rs 1,00,000 crore; Cash Reserve Ratio (CRR) was cut by 100 basis points to 3 per cent; and accommodation under Marginal Standing Facility was hiked from 2% of Statutory Liquidity Ration to 3%: Rs 1,37,000 crore.
The RBI was expected to follow up with monetary-side interventions after the government announced fiscal measures to cushion the economy from the Covid impact. The RBI governor said that there will be a gradual revival of activity and demand by the second half of FY21 and that it is essential to instill confidence at this point of time. Extension of resolution for stressed assets, asset classification standstill by excluding moratorium period of three months.
RBI is ready to use all its instruments to address the dynamics of an unknown future, says Shaktikanta Das.
"India is seeing a collapse of demand". Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, were shifted across the board by three months. He added that the lending institutions are being permitted to restore the margins for working capital to the origin level by March 31, 2021.
"Assuming that economic activity gets restored in a phased manner in the second half of this year and taking in consideration favourable base effect, it is expected that combined fiscal, monetary and administrative measures now undertaken by both the government and RBI create conditions for gradual revival of activities in the second half of 2020-21".
"GDP growth in 2020-21 is estimated to remain in the negative territory with some pick up in growth impulses in the second half of 2020-21 onwards", he said.
Earlier this month, RBI Governor Shaktikanta Das held a meeting with heads of both public and private sector banks to take stock of the economic situation and review the implementation of various measures announced by the central bank.
MPC is of the view that headline inflation in first half of 2020 will be stay intact but by Q3 and Q4 it may fall below the target of 4 percent, said the RBI governor. Supply shock to food prices may linger, the MPC felt and called for re-appraisal of import duties. Further, Das said government revenues have been impacted severely due to the slowdown in economic activity amid the pandemic.