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Coronavirus impact | RBI announces two key steps to boost liquidity in economy

The RBI has several policy tools at its command, Das said, adding that their response will neither be premature nor delayed, in order to ensure optimum impact.

March 16, 2020 / 07:20 PM IST

Reserve Bank of India Governor Shaktikanta Das, in a press conference on Monday, announced two key measures that the central bank will take to improve the liquidity condition of the Indian economy and financial markets.

The RBI will conduct another 6-month dollar/rupee swap on March 23 later this month along with conducting Long-Term Repo Operations (LTRO) of up to Rs 1 lakh crore at the policy rate in multiple tranches.

LTROs are policy instruments/tools designed to inject liquidity in the market and pressuring banks to reduce short term lending rates.

Also Read | Yes Bank crisis : RBI Governor says depositor money safe, no need to withdraw in panic

Addressing the media, Das said the ongoing coronavirus outbreak is rapidly evolving into a human tragedy and it is likely to have an impact on the economic activity in India.

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The virus outbreak, which has been declared a global pandemic by the World Health Organisation (WHO) has led to a tightening of the liquidity situation the world over.

RBI Governor Shaktikanta Das noted that the government has been on a war-footing, taking necessary steps to prevent the spread of COVID-19. He said that the economic impact of the outbreak will further be assessed in the central bank's next monetary policy committee (MPC) meeting.

The RBI has several policy tools at its command, Das said, adding that their response will neither be premature nor delayed, in order to ensure optimum impact.

Also Read | Coronavirus pandemic : Does an emergency RBI rate cut make sense for India?

The central banks of over 40 countries have slashed their policy rates in 2020, with as many as 20 of them have taken the step this month. The latest such move was taken by the US Federal Reserve earlier today, wherein it slashed interest rates by around 150 basis points bringing it down to virtually zero.

On being asked why the RBI isn't going ahead with the rate cut, Governor Das said that while nothing is off the table, any decision on rate cuts would have to be taken by the MPC.
Moneycontrol News
first published: Mar 16, 2020 07:20 pm

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