In a significant move, the Reserve Bank of India on Tuesday announced measures to help the state governments at a juncture when they are grappling with the novel coronavirus crisis. The RBI has decided to increase the number of days for which a state or Union Territory can be in overdraft continuously from 14 to 21 working days. Similarly, a state or Union Territory can be in overdraft in a quarter for 50 working days now from the stipulated 36 days. The rationale of this decision is to provide more flexibility to the state governments and Union Territories to tide over their cash flow mismatches. Coming into force with immediate effect, this arrangement shall remain valid till September 30, 2020.
RBI permits greater space to State Governments/ Union Territories for availing overdraft facilitieshttps://t.co/IiYCNhwOIX— ReserveBankOfIndia (@RBI) April 7, 2020
On March 27, RBI Governor Shaktikanta Das announced that all commercial banks, co-operative banks, all financial institutions, and NBFCs were permitted to allow a three-month moratorium on payment of EMI on all term loans outstanding on March 1, 2020. Pursuant to this, the banks can adjust their repayment schedule and other due dates by three months. The important aspect is that the moratorium will have no adverse impact on the credit history of the beneficiary.
Moreover, the repo rate has been cut by 75 basis points to 4.4% and the reverse repo rate has been reduced by 90 basis points to 4%. According to the RBI Governor, the reduction in the policy repo rate was done to “revive growth and mitigate the impact of COVID-19 and ensure financial stability". Currently, there are 4421 confirmed novel coronavirus cases in India out of which 326 people have recovered while 114 individuals have lost their lives.
#BREAKING | RBI MPC votes for sizeable cut in key repo rate, by 75 basis points to 4.4%, reverse-repo to 4%; accommodative stance retained. Watch Governor Shaktikanta Das' #LIVE briefing here - https://t.co/RZHKU3wOei pic.twitter.com/w2nSoZ5cF8— Republic (@republic) March 27, 2020