RBI announced relaxation of asset classification norms.
- Those accounts that have availed the moratorium facility given by RBI, that period of moratorium will be excluded from the 90-day NPA classification norms of the RBI.
- RBI announced moratorium of three months for term loans but a lot of NBFCs were struggling to meet their obligations as the moratorium norms were being interpreted differently by different banks.
- To encourage banks to deploy the reserve funds for lending purposes, the RBI reduced reverse repo by 25 bps from 4% to 3.75%. Policy repo rate remains unchanged at 4.4%.
- The Liquidity Coverage Ratio has been brought down to 80 per cent from 100 per cent earlier. This will be restored in phases by April 2021.
- Banks shall not make any dividend payments till further orders. The RBI also announced measures to boost liquidity of financial institutions like NABARD, SIDBI and NHB. A special refinance facility of Rs 50,000crores to meet sectoral credit requirements has been announced for them. This will include Rs 25,000crore to NABARD for refinancing RRBs, co-operative banks and micro-finance institutions, Rs 15,000crore to SIDBI and Rs 10,000crore to National Housing Bank (NHB) for supporting Housing Finance Companies (HFCs).
- The RBI’s announcement comes in the wake of downgrading of economic growth in the current fiscal. The World Bank has forecast India’s economic growth at 1.5%-2.8% in 2020 while the IMF has predicted the growth to slip to 1.5%. Barclays has projected zero growth for 2020. ASSETCLASSIFICATIONE5F6BD8C6D574086B7D36DC8CF7E13A9