RBI Governor Keeps Rates Unchanged in MPC
Borrowing
Up 90% (Current 75%) of Value Pledged against Gold and Jewellery
Allowed
·
90% against Gold and Jewellery
·
Sharper Focus on
Inclusive Development, through greater Priority Sector Lending
·
Additional credit support
for housing and rural sectors 5K crs each to NHB
and NABARD
·
Relieving stress of
borrowers Debt Resolution Plan
·
Further support for MSME
sector Stressed MSME
·
Reduced Capital Charge
for Market Risk MF/ETF Equalled Debt Instrument
·
Banks get more
flexibility in managing liquidity and cash reserves Auto e-Kuber
·
Safeguards to bring in
better credit discipline Check on Multiple Accounts
·
Powering Responsible
Financial Innovation Innovation Hub
·
Cheque Payments to be Safer Positive Pay for 50K Cheques
·
Soon, make retail
payments using your card or mobile phone Offline Mode, Disputes
The Reserve Bank of India has announced a set of additional developmental
and regulatory policy measures to improve flow of money and provide further support
to the financial system, in the wake of rising COVID-19 infections in India and
the world on 6 August, 2020. The Governor Shaktikanta
Das stated that the measures will ease the financial stress caused by disruptions
due to the worst peacetime health and economic crisis of the last 100 years. Here
is a summary of the announcements.
1.
90% against Gold and Jewellery
To mitigate impact of COVID-19 on ordinary citizens, RBI has decided to allow
loans for non-agricultural purposes, against gold and jewellery,
to be granted up to 90 per cent of the pledged value of gold ornaments and jewellery. This relaxation of the limit, up from current limit
of 75%, shall be available till March 31, 2021.
2.
Sharper Focus on Inclusive Development, through greater
Priority Sector Lending
Banks will now be incentivized to address regional disparities in flow of
priority sector lending. The weightage given for fresh credit given to priority
sectors will be adjusted based on current credit flow of districts. Start-ups too
will now get this type of credit support; green energy sectors will now get higher
lending under the framework.
3.
Additional credit support for housing and rural sectors
5K crs each to NHB and NABARD
A special liquidity facility of ₹ 5,000 crore is being provided to
National Housing Bank, to improve fund flow to the housing sector. A ₹ 5,000
crore fund has been earmarked for NABARD too, to improve fund availability for Non-Banking
Finance Companies and Micro Finance Institutions.
4.
Relieving stress of borrowers Debt Resolution
Plan
To address the heightened debt burdens being faced by borrowing firms, RBI
has decided to enable lenders to implement a debt resolution plan for eligible corporate
debts as well as personal loans. This shall be done without any change in ownership,
while classifying such exposures as standard assets, subject to specified conditions.
An Expert Committee chaired by K. V. Kamath is being constituted to make recommendations
on the parameters for such debt resolution plans.
5.
Further support for MSME sector Stressed MSME
In addition to the debt restructuring framework in place for MSMEs, RBI has
announced that stressed MSME borrowers will be made eligible for restructuring their
debt under existing framework, provided their accounts with the concerned lender
were classified as standard as on March 1, 2020. This restructuring will have to
be implemented by March 31, 2021.
6. Reduced Capital
Charge for Market Risk MF/ETF Equalled Debt
Instrument
The capital charge on banks for holding Mutual Fund /Exchange Traded Fund
will be brought in harmony with the charge for directly holding a debt instrument.
The Governor has said that this will result in substantial capital savings for banks
and boost the corporate bond market.
7.
Banks get more flexibility in managing liquidity and
cash reserves Auto e-Kuber
RBI is introducing an automated mechanism in e-Kuber
system, its core banking solution, to provide banks more flexibility/discretion
in managing their liquidity and maintenance of cash reserve requirements.
8.
Safeguards to bring in better credit discipline
Check on Multiple Accounts
RBI is bringing in safeguards for opening of current accounts and cash credit
(CC)/overdraft (OD) accounts, for borrowers availing credit facilities from multiple
banks. This has been done in view of the concerns emanating from use of multiple
operating accounts by borrowers.
9.
Powering Responsible Financial Innovation
Innovation Hub
RBI will set up an Innovation Hub in India, to further promote and facilitate
an environment that can accelerate innovation across the financial sector.
10. Cheque Payments to be Safer Positive Pay for 50K Cheques
To improve safety of cheque payments, a mechanism
of Positive Pay is going to be introduced, for all cheques
of value ₹ 50,000 and above. This will cover approximately 20 per cent of
total cheques, and 80 per cent of total cheques by value.
11. Soon, make
retail payments using your card or mobile phone Offline Mode, Disputes
A system will soon be introduced enabling retail payments to be made in offline
mode using cards and mobile devices. Citizens will also be able to resolve disputes
arising from digital payments, through an online dispute resolution mechanism.
The RBI Governor announced that the policy repo rate stands unchanged at
4.0%. Other key rates such as Marginal Standing Facility, reverse repo rate and
bank rate too have been kept untouched. The supportive stance of monetary policy
will continue as long as necessary to revive growth and mitigate impact, while keeping
inflation within target.
Patience and perseverance, if we have them, overcome mountains of difficulties
Mahatma Gandhi
The Governor concluded his address quoting the father of the nation, stating
that the central bank will remain alert and do whatever is necessary to revive the
economy and preserve financial stability. The pandemic poses a challenge of epic
proportions, but our courage and conviction will conquer COVID-19, said the Governor.