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You said it right, Mr Governor! Tough times do not last, but tough people do

Addressing the media via teleconferencing, RBI governor begins his policy statement saying ‘Tough times do not last but tough people do and tough institution’. I think we are in those times right now.

March 27, 2020 / 01:47 PM IST
Reserve Bank of India (RBI) Governor Shaktikanta Das

Reserve Bank of India (RBI) Governor Shaktikanta Das

Three cheers for the bazooka policy from the Reserve Bank of India (RBI) which could help cushion the economic impact of COVID-19 on India. But, what was more reassuring was the body language as he assured investors that all is well and this shall pass too.

Addressing the media via teleconferencing, RBI governor began his policy statement saying ‘Tough times do not last but tough people do and tough institution’. I think we are in those times right now.

What we saw on D-Street was the complete opposite – the S&P BSE Sensex wiped out gains of more than 1,000 points in intraday trade (at the time of writing the article), but this is not new.

We have seen market factoring in positive outcomes well in advance. It becomes a classic case of ‘buy on rumours’ and ‘sell on the news’. The Nifty50 gained more than 1,000 points in the last three trading sessions.


What was comforting was the fact that the governor was positive in his approach and assured investors that the bank is ready to take unconventional methods to support the economy in these difficult times.

“A massive bazooka from the RBI in "mission mode". It's a relief cum stimulus package with a big repo cut and even bigger reverse repo cut. This together with CRR cut will be a big stimulus for banks to lend. Total liquidity injection along with measures announced earlier would amount to Rs 370000 crores, which is 3.2 % of GDP. The 3-month moratorium on term loans is a great relief to borrowers,” Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services told Moneycontrol.

“The combination of measures to boost liquidity, improve monetary transmission and relax repayment pressures will act with force multiplier in the economy. RBI has done a great job. As the Governor said," Tough times don't last, but tough institutions do." RBI has shown that it is tough,” he said.

The 75 bps rate cut could well be the beginning. Experts see another round of rate cut from the Reserve Bank of India to push the economy back in recovery mode. The central bank slashed rates by 75 basis points to 4.40 percent from 5.15 percent earlier.

The marginal standing facility (MSF) rate and the Bank Rate stand reduced to 4.65 percent from 5.40 percent earlier. Further, the reverse repo rate under the LAF stands reduced by 90 basis points to 4.0 percent.

“The RBI has surpassed expectations by delivering more than what the market anticipated, and its promise to 'do whatever it takes' has come good,” Rahul Bajoria, Chief India Economist, Barclays said.

“The steps to ease working capital pain, reduce liquidity costs and provide moratorium on term loans will alleviate stress across various sectors. We continue to see rates dropping to 3.50% by August 2020,” he added.

The message was clear from the RBI to banks to use the cash in boosting economic activity. As a one-time measure to help banks tide over the disruption caused by COVID-19, it has been decided to reduce the cash reserve ratio (CRR).

The CRR was reduced for all banks by 100 basis points to 3.0 percent of net demand and time liabilities (NDTL) with effect from the reporting fortnight beginning March 28, 2020.

“RBI comes out with lots of measures to ensure the stability of the financial system and inject liquidity in the market amid ongoing turmoil of pandemic,” Amit Gupta, Co-Founder & CEO, TradingBells told Moneycontrol.

“It is a very good policy to cheer the market but the problem is that the market has already rallied too much from lower levels ahead of policy and real trend decider for the market will be the trend in new cases of Covid-19 globally and locally,” he said.

Relief for borrowers:

Another need of the hour measure was giving relief to borrowers, industrialists as well as citizens who are in the service industry. Ease in working capital financing and rescheduling of payments will not qualify as a default for the purposes of supervisory reporting and reporting to credit information is a welcome step.

All commercial banks, co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) (“lending institutions”) are being permitted to allow a moratorium of three months on payment of installments in respect of all term loans outstanding as on March 1, 2020.

"The rate cuts, EMI and working capital holiday (not waiver) is positive for individuals and companies alike, though with the forbearance of fixed costs for corporates,” Vinay Pandit, Head - Institutional Equities, IndiaNivesh told Moneycontrol.

“It will ease the pressure on cash flows in current times where cash flows (revenues slowing and expenses continuing) are impacted significantly, especially for MSME, small business and individuals who are impacted due to low visibility on income,” he said.

Pandit further added that it is positive for non-banking stocks, though they need to wait and watch how this plays out for BFSI companies, and one can read it as an indirect extension of NPA recognition for stressed assets.

Disclaimer: The views and investment tips expressed by experts on are their own and not those of the website or its management. advises users to check with certified experts before taking any investment decisions.

Kshitij Anand is the Editor Markets at Moneycontrol.
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