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Here is a summary of what the Modi government and the RBI have done so far in an effort to dampen an economy that was slowing down even before the outbreak.
For banks:
CHEAPEST CASH: A series of steps announced this year aim to encourage banks to lend.
– Banks do not need to reserve cash reserves for small business loans between January 31 and July 31, or for credit to help consumers buy a car or home (announced February 6)
– Policy interest rate – the repurchase rate – cut by 75 basis points in one move this year. However, the effective deposit rate has been lowered by 115 basis points to discourage lenders from gambling safely and parking cash with the RBI (March 27 and April 17)
– Cash reserve ratio decreased from 3% to 3% (March 27)
– The liquidity coverage ratio was reduced to 80% from 100% (it will be restored to 90% on October 1 and 100% on April 1, 2021)
LOAN FREEZE: RBI Governor Shaktikanta Das has halted the loan repayment schedule amid an unprecedented three-week blockade announced by Prime Minister Narendra Modi
– All lenders can freeze payments for three months on outstanding term loans on March 1
– Lenders allowed interest payments on working capital facilities to be suspended for three months; accrued interest can be paid later and loans will not be past due
– The steps are in addition to the previous measures that allow a single restructuring of loans to small companies that were in default as of January 1.
– Commercial property project loans that are delayed for reasons beyond the developer’s control may be treated as standard for another year
REGULATORY DIFFERENCES: The implementation of stricter regulations has been delayed
– The rules requiring banks to finance their activities through stable sources have been deferred until October 1 from April 1.
– Capital Conservation Buffer completion ended until September 30 from March 31
– Lenders allowed an additional 90 days to reach a resolution plan on large accounts in default (April 17)
SPECIAL WINDOWS: These include support for corporate borrowers as well as the rural industry.
– TLTRO 1.0 – Rs 1 lakh crore of specific long-term funds from the central bank to banks to invest only in corporate bonds, with the aim of alleviating the cash crisis in companies (on April 15, RBI announced a new rule which limits any bank’s exposure to a single entity to 10% of the TLTRO funds invested)
– TLTRO 2.0: Rs 50 billion initial, with at least half going to lower-rated companies (April 17)
– Special refinancing for umbrella organizations – Rs 50,000 crore to go to Indian financiers like Sidbi, Nabard, NHB who affordably finance the rural sector and agriculture (April 17)
HIGHER PROVISIONS: Banks ordered to maintain a higher provision of 10% on all frozen loans distributed during the quarters of January-March and April-June, which can be adjusted later against real slides (April 17)
DETAINED DIVIDENDS: Banks cannot pay dividends for the year ended March 31 to conserve capital. The decision will be reviewed based on its financial position on September 30.
Sovereign Bonds and Rupees:
MORE MONEY: The RBI has been injecting additional liquidity into the banking system to keep bond yields low.
– In its February policy review, the RBI said it will provide Rp 1 trillion in one- and three-year cash at the policy rate through long-term repo operations to aid monetary transmission (February 6)
– The RBI increased these measures in March and April.
– Two variable rate repo operations of Rs 500 billion to adjust liquidity at the end of the financial year
– A touch of temporary liquidity for primary bond subscribers has been improved to Rs 10 billion Rs from Rs 2,800 Rs
– Rs 1 lakh crore from LTRO
– Purchase on the open market of government bonds worth Rs 100 billion on March 20; another total of Rs 30,000 crore from OMO purchases March 24 and 26
– 1 trillion rupees through 16-day variable rate repos
FOREIGN INVITORS: India has opened a wide swath of its sovereign bond market to foreign investors, taking its biggest step thus far to ensure access to global indices as the government embarks on a record borrowing plan
LOAN LIMIT: India announced a number of fiscal loans for the first half that is lower than operators expected, as it seeks to control any increase in yields amid a global risk aversion that led to exits from emerging markets
MORE DOLLARS: RBI pledged to inject dollars through dollar-rupee swaps
– Two lines of exchange of $ 2 billion each for March 16 and 23 provided $ 2.7 billion
SHORTER TRADING HOURS: The sovereign and rupee debt trading will take place from 10 a.m. at 2 p.m. Mumbai time from April 7 to April 30. These markets normally operated from 9 a.m. at 5 p.m.
For capital markets:
– It allows companies an additional 45 days to declare their quarterly and annual results; extends the filing date of the corporate governance report by one month; company meetings exempt from the maximum time provision between two meetings (March 19)
– Increased equity trading margin, reduced market-wide position to ease volatility in equities (March 20)
– The relaxed compliance requirements for ReITs, InVITS, extend the deadline for risk management rules for liquid mutual funds; The term for the presentation of obligations and issuance of preferred shares is extended (March 23)
– Increased default threshold required to trigger insolvency proceedings to Rs 10 million from Rs 100,000 (March 24)
– Capital, debt market services exempt from blocking (March 25)
– Allows top 100 publicly traded companies for another month to meet annual general meeting requirements (March 26)
– Shareholders allowed an additional 45 days to disclose their consolidated interest in companies for the fiscal year ending March 31 (March 27)
– I relaxed the recognition of default by local credit rating companies if a delay in the payment of interest or principal is due; Allows Foreign Portfolio Investors to Relax in Document Processing (March 30)
– Simplified rules to accelerate rights issues, and also extended the validity of its comments on public affairs by six months from the expiration date to help companies raise funds amid the coronavirus pandemic (April 17 )
For states and broader economy
EXPORTS: The time period for the realization and repatriation of export earnings for shipments before July 31 has been extended to 15 months to provide greater flexibility to exporters in negotiating future export contracts with buyers abroad.
STATE LOAN: State administrations have been allowed to borrow up to half of their annual target for the year beginning April 1 whenever they want. In a typical year, strict rules would govern the schedule, which would include cash transfers from the federal government that are now threatened as the blockade erodes revenue.
– RBI decided to increase the Forms and means limit (short-term financing limit) by 60% so that all states allow them to “overcome the situation”. The revised limits went into effect in April and will be valid for six months.
– Facilitates states overdraft rules through September 30 to handle cash flow mismatches
CROPS: State agencies will buy more oilseeds and pulses from farmers at minimum purchase prices set by the government
LOCK MADE EASY: India allowed farmers and certain industries outside virus hotspots to resume operations from April 21
For consumers:
FREE FOOD AND FUEL: 800 million poor people will receive 5 kilograms of wheat or rice and 1 kg pulses every month during April to June; 80 million families will receive free cooking gas
CASH TRANSFERS: 200 million women with basic bank accounts will earn Rs 500 per month through June; 30 million elderly, widowed and disabled people to obtain 1,000 rupees; 87 million farmers will immediately receive 2,000 rupees under an existing program
INSURANCE: 2.2 million health workers fighting against COVID-19 will obtain insurance coverage of Rs 50 lakh
JOBS AND WAGES: For people who earn less than Rs 15,000 a month, the government will pay 24% of their monthly wages that are incorporated into pension accounts and provident funds; Wages under the employment guarantee program were increased to provide an annual benefit of 2,000 rupees to a worker.
All Bloomberg Data
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