Acknowledging a long-term economic ramification fuelled by the novel coronavirus pandemic, the Reserve Bank of India (RBI) announced a slew of extra-ordinary measures on Friday. “In spite of the very challenging environment, I remain optimistic,” RBI Governor Shaktikanta Das averred as he announced the steps to achieve a three-fold objective: mitigate the negative effects of the virus, revive growth, and above all preserve financial stability.
Here are the measures are taken by India’s central bank:
- The cumulative reduction in the policy repo rate of 135 basis points
- Accommodative stance of monetary policy as long as necessary to revive growth, while keeping inflation within the target
- The two US Dollar buy/sell swap auction of $5 billion each conducted on March 26 and April 23, 2019, injecting liquidity into the banking system amounting to Rs 34,561 crore and Rs 34,874 crore, respectively
- Seven open market purchases, injecting Rs 92,500 crore into the system
- The four simultaneous purchase and sale of government securities under Open Market Operations (special OMOs or what is known as operation twist) during December and January (December 23 and 30, 2019 and January 6 and 23, 2020) to ensure better monetary policy transmission
- The five long-term repo operations (LTROs) between February 17 and March 18, 2020, for one-year and three-year tenors amounting to Rs 1,25,000 crore of durable liquidity at a reasonable cost (fixed repo rate)
- The exemption on incremental credit disbursed by banks between January 31 – July 31, 2020, on retail loans for automobiles, residential housing and loans to micro, small and medium enterprises (MSMEs) from the maintenance of cash reserve ratio (CRR).
- The two 6-month US Dollar sell/buy swap auction providing dollar liquidity amounting to $2.71 billion
- The fine-tuning variable rate repo auctions of Rs 50,000 crore and Rs 25,000 crore of 8 days and 3 days maturity on March 26 and March 31, respectively, with standalone primary dealers (SPDs), allowed to participate
- The fine-tuning variable rate Repo auctions of 16-day maturity amounting to Rs 77,745 crore on March 23-24, 2020
- The amount under the Standing Liquidity Facility (SLF) available for standalone primary dealers was enhanced from Rs 2,800 crore to Rs 10,000 crore on March 24, 2020, and this will be available till April 17, 2020.