Here's the full text of RBI Governor Shaktikanta Das' May 22 conference
Read what the RBI Governor said here in full:
RBI Governor Shaktikanta Das May 22 addressed the media for the third time in three months to announce Coronavirus-related relief measures.
Here are the key highlights:
--Repo rate cut by 40 bps to 4 percent, Reverse Repo gets adjusted to 3.35 percent.
--GDP growth outlook for FY21 seen in negative territory, some pick up seen in H2 of FY21.
--Term loan moratorium extension
--Accumulated interest for moratorium period can be converted into a term loan. It does not have to be repaid immediately after moratorium ends--Group exposure limit for lenders increased to 30 percent from 25 percent
Highlights of RBI measures since lockdown: Growth and inflation statements
> May 22
- FY21 GDP growth seen in negative territory
- MPC believes inflation outlook is uncertain
> April 17
- Inflation could decline further and settle below 4 percent by H2FY21
- Inflation to fall below 4 percent target by Q3, Q4
> March 27
- Implied GDP growth of 4.4 percent in H2 is now at risk
- Projection of growth and inflation to be heavily contingent on spread of pandemic
Highlights of RBI measures since lockdown: Reverse repo rate cut by 155 bps
> May 22: Reverse Repo Rate cut by 40 bps to 3.35 percent
> April 17: Reverse Repo Rate cut by 25 bps to 3.75 percent
> MARCH 27: Reverse Repo rate cut by 90 bps to 4 percent
Highlights of RBI measures since lockdown: Repo rate cut by 115 bps
> May 22: RBI cuts repo rate by 40 bps to 4 percent
> March 27: RBI cuts repo rate by 75 bps to 4.40 percent
Highlights of RBI measures since lockdown
> Repo rate cut by 115 bps
> Reverse repo rate cut by 155 bps
> FY21 GDP growth seen in negative territory
> MPC believes inflation outlook is uncertain
Among the different sectors, the RBI announcements today are expected to benefit the real estate sector the most. This includes both the 40 basis points repo rate cut as well as the three-month term loan moratorium extension. These measures will infuse liquidity in real estate sector.
Mihir Vora, Director & Chief Investment Officer, Max Life Insurance said that the credit risk-aversion in the financial markets are likely to continue.
"The high-rated borrowers will continue to get easy funding, and the lower-rated borrowers will continue to struggle to raise funds. More direct fiscal support to businesses, workers and stressed segments will be needed to contain job losses, stimulate the demand-side of the economy and encourage private sector investments to counter the demand shock due to the domestic lockdown and fall in exports," said Vora.
RBI governor Shaktikanta Das also said in his speech that central banks are typically seen as conservative institutions. Yet when the tides turn and all the chips are down, Das said that it is to them that the world turns for support.
As the nation prepares for this future, RBI governor Shaktikanta Das said that the words of Mahatma Gandhi should inspire us to fight on, "We may stumble and fall, but shall rise again..."
Transmission of rates by banks has been positive As far as transmission is concerned, RBI governor Shaktikanta Das said that the one-year median marginal cost of funds-based lending rate (MCLR) declined by 90 bps (February 2019-May 15, 2020). The weighted average lending rate (WALR) on fresh rupee loans has cumulatively declined by 114 bps since February 2019, of which 43 bps decline occurred in March 2020 alone.
Further, he said that the WALR on outstanding rupee loans declined by 29 bps during October 2019-March 2020. Domestic financial conditions have also eased as reflected in the narrowing of liquidity premia in various market segments. After April 17, Das said that interest rates on 3-month CPs, 3-month CDs, 5-year AAA corporate bonds, 91-day Treasury Bills, 5-year and benchmark 10-year government paper have softened by 220 bps, 108 bps, 48 bps, 71 bps, 59 bps and 66 bps, respectively, by May 15, 2020.