No change in repo, reverse repo rates

Rs10,000 cr new liquidity push; gold loan LTV raised to 90 pc

MUMBAI: The Reserve Bank of India (RBI) on Thursday decided to leave the repo rate unchanged at 4 per cent and the reverse repo rate at 3.35 per cent, while retaining the marginal standing facility (MSF) and the Bank rate at 4.25 per cent.

The RBI governor Shaktikanta Das (seen in the picture) said the monetary policy committee (MPC) unanimously voted for these decisions as well as to continue with the accommodative stance of monetary policy as long as necessary to revive growth, mitigate the impact of COVID-19, while ensuring that inflation remains within the target going forward.

RBI said the headline CPI inflation, which was at 5.8 per cent in March 2020, was placed at 6.1 per cent in the provisional estimates for June 2020.

 

Rs10,000 cr Special liquidity facility

Considering the COVID-induced adverse market situation, additional special liquidity facility of Rs10,000 crore will be provided at the policy repo rate consisting of Rs5,000 crore to the National Housing Bank (NHB) to shield the housing sector from liquidity disruptions and augment the flow of finance to the sector through housing finance companies (HFCs); and Rs5,000 crore to the National Bank for Agriculture and Rural Development (NABARD) to ameliorate the stress being faced by smaller non-bank finance companies (NBFCs) and micro-finance institutions (MFIs) in obtaining access to liquidity.

Stressed assets resolution plan

The RBI has decided to provide a window under the June 7th Prudential Framework for the corporates in financial stress in order to enable lenders to implement a resolution plan in respect of eligible corporate exposures – without change in ownership – as well as personal loans, while classifying such exposures as standard assets, subject to specified conditions.

 

MSME debt restructuring

It has also been decided that stressed MSME borrowers will be made eligible for restructuring their debt under the existing framework, provided their accounts with the lender concerned were classified as standard as on March 1, 2020. “This restructuring will have to be implemented by March 31, 2021,” RBI statement said.

 

Gold loan LTV raised to 90 pc

As per the extant guidelines, loans sanctioned by banks against pledge of gold ornaments and jewellery for non-agricultural purposes should not exceed 75 per cent of the value of gold ornaments and jewellery thus pledged.

With a view to mitigating the impact of COVID-19 on households, it has been decided to increase the permissible loan to value ratio (LTV) for such loans to 90 per cent. This relaxation shall be available till March 31, 2021.

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