RBI Cuts Reverse Repo Rate by 25 bps to 3.75%

17-Apr-20

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RBI has slashed the Reverse Repo rate by 25 basis points to 3.75 %.
The Repo rate has been kept unchanged at 4.40%.
RBI has also announced the launch of (Targeted Long Term Repo Operation) TLTRO 2.0 to address the liquidity needs of the NBFCs and microfinance institutions
TLTRO 2.0 will be undertaken in tranches, with an amount of Rs 50,000 crore to begin with.
The Banks availing these funds will be required to deploy the same within one month and should be invested in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs with at least 50 percent of the total amount availed going to midsized NBFCs and MFIs.
A special re-financing facility of Rs 50,000 crore has also been announced for financial institutions like Nabard (25,000 cr), National Housing Bank (10,000 cr) and Sidbi (15,000 cr).
The Liquidity Coverage Ratio (LCR) requirement of scheduled commercial banks has been brought down from 100 percent to 80 percent with immediate effect. This will help banks to have more capitals to deploy in the market.
This requirement shall be gradually restored back in two phases, i.e. 90 percent by October 1, 2020 and 100 percent by April 1, 2021.
The ways and means advances (WMA) limit has been increased by 60 per cent over and above the level as on March 31, 2020. This increased limit will be available till September 30, 2020.
All accounts for which banks grant moratorium or deferment, and which were standard as on March 1, 2020, the 90-day NPA norm shall exclude the moratorium period i.e. there would be an asset classification standstill for all such accounts from March 1, 2020 to May 31, 2020.
Banks will also have to maintain higher provision of 10 percent on all such accounts under the standstill over two quarters, i.e., March, 2020 and June, 2020 to ensure that they maintain sufficient buffers and remain adequately provisioned to meet future challenges.