RBI Governor Press Conference Highlights: Shaktikanta Das Announces Emergency 40 Basis Point Rate Cut, 3-Month Loan Moratorium Extension 
Shaktikanta Das, governor of the Reserve Bank of India (RBI), poses for a photograph following an interview at the central bank in Mumbai, India. (Photographer: Kanishka Sonthali/Bloomberg)

RBI Governor Press Conference Highlights: Shaktikanta Das Announces Emergency 40 Basis Point Rate Cut, 3-Month Loan Moratorium Extension 

Latest First
  • Oldest First

RBI's Top 5 Announcements

  • Repo rate cut by 40 basis points
  • Loan moratorium extended for 3 months.
  • Headline inflation could stay firm in first half of 2020, but soften thereafter. If inflation trajectory evolves as expected, space will open up for more rate cuts.
  • India GDP growth in 2020-21 is estimated to remain in negative territory.
  • Regulatory measures to support exports, imports, states.

Also read: Bonds Rally in India After RBI Announces Emergency Rate Cut

Bankers React To Announcements

Rajnish Kumar, Chairman, SBI

  • The central bank’s measures around moratorium, reduction in interest rates etc will allow the revival of the economy.
  • RBI response is a calliberated one, keeping in mind the situation which is arising.
  • There is a need for a one time restructuring scheme for those which are facing deeper stress than temporary cash flow issues, he added.
  • Reviewing NBFCs on a case to case basis for moratorium.
  • Have to keeping in mind that the NBFCs are seeing an improvement on their collections.
  • Government has come out with a partial guarantee scheme
  • Considering these measures there is enough headroom for NBFCs to manage their cash flows.
  • Currently 20 percent of customer base have opted for moratorium.
  • Customers are seeking moratorium not just due to cash flow issues, but also to conserve cash.

Mrutyunjay Mahapatra, MD & CEO, Syndicate Bank

  • RBI's steps a mix of responsive & proactive measures.
  • RBI governor didn't refer to any additional conditions w.r.t. moratorium; my understanding is that all sectors which were beneficiaries, will get the extension.

Experts React To Announcements

Jayesh Mehta, MD & Country Treasurer, BofA-ML

  • Rate cut a positive surprise; not many weren't expecting the cut so soon
  • MPC is going to be very focussed on growth, not expecting much focus on inflation in the near term
  • Further, small rate cuts possible, if necessary transmission doesn't happen

Saugata Bhattacharya, Chief Economist, Axis Bank

  • There's a confluence of problems; made sense for the MPC to not wait any longer
  • Rate cut will allow banks to reduce rates on fresh loans
  • Entire set of measures today designed to ease cash flow pressures
  • Don't expect demand-led inflation spike in the near term
  • Further, small rate cuts possible

Rahul Bajoria, India Economist, Barclays

  • MPC's surprise rate cut shows policy makers nimble and calibrated in response to incoming data
  • Takes 9-15 months for rate cuts transmission; but rate cut is important from a signaling standpoint
  • Measures announced could help improve credit transmission, even if rate transmission takes longer
  • No indication that reverse repo will go below the deposit rate
  • Don't think front-loaded cutting cycle necessarily indicates a deeper cutting cycle
  • RBI signalling to the markets that things are going to be fairly accomodative given the evolving situation

Karthik Srinivasan, ICRA

  • Hope extension of moratorium is applicable to NBFCs & HFCs.
  • Had confusion in the first round; wouldn't want to have any hiccups on the non-bank side now that moratorium has been offered effectively for 6 months.
  • Collection efficiencies may come down, since the moratorium has been extended; expect more customers to opt for the moratorium.
  • Will need to wait till mid-October to estimate asset quality trends.

RBI's Goals

  • Keep financial system, financial markets sound, liquid and smoothly functioning
  • To ensure access to finance to all, particularly those that tend to get excluded by financial markets
  • To preserve stability

Regulatory Measures: Moratoriumm Extended By Three Months

  • Measures done to complement the rate cut.
  • As and when the situation warrants, to the best of our abilities, we are taking all essential measures.
  • Rs 15,000 crore facility created for SIDBI to be extended by another 90 days.
  • To extend line of credit of Rs 15,000 crore to EXIM Bank for 90 days.
  • Maximum permissible period of pre-shipment and post shipment export credit to be extended to 15 months.
  • To extend time period for outward remittances for normal imports from 6 months to 12 months.
  • In view of extension of lockdown, the provisions for moratorium on term loan repayments are being extended by another 3 months.
  • RBI permits banks to extend margins on working capital facilities to original levels by March 31.
  • Group exposure limit of banks to be increased from 25 percent to 30 percent of eligible capital base till June 30, 2021

Das On Inflation, Growth Outlook

The MPC gave a directional inflation guidance instead of one with levels, citing complications due to partial release of data by the NSO.

  • Prices of vegetables, pulses, oil seeds have emerged as pressure areas
  • India's merchandise exports plunged by 60.3 percent in April
  • India's forex reserves have increased by $9.2 billion since Apr 1 to $487 billion
  • Among pressure points, elevated levels of pulses prices is worrisome
  • International crude oil prices, metals, and industrial raw materials likely to remain soft.
  • MPC is of the view that headline inflation could stay firm in first half of 2020, but soften thereafter
  • In Q3 and Q4 of current financial year, headline inflation could fall below MPC's projection
“GDP growth in 2021 is estimated to remain in negative territory.”

As for the interest rate, Das signaled towards a possibility of further rate cuts depending on the need and policy space. TheMPC believes that it is essential to instill confidence and ease financial conditions, he said.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.