The Central Bank Annual Report for the year 2019, released last week, has outlined a series of benefits which the Bank has provided to the economy in the wake of the Covid-19 outbreak.
The Statutory Reserve Ratio (SRR) on all rupee deposit liabilities of licensed commercial banks(LCBs) was reduced by 1.00 percentage point by the CB, which injected permanent liquidity of around Rs. 65 billion to the market, the Annual Report said.
A large surplus has been maintained in the domestic money market through open market operations (OMOs) of various types and maturities, to avail sufficient liquidity for financial institutions, enabling them to facilitate urgent financial requirements of the economy.
Meanwhile, in April 2020, the Central Bank reduced the Bank Rate, which is an administratively determined rate that could be used in periods of emergency, by 500 basis points from 15 per cent to 10 per cent. Several measures have also been undertaken to ease the burden on businesses and people arising from the outbreak and containment measures.
A wide ranging debt moratorium has been announced for the tourism, plantations, IT and apparel sectors, related logistics providers and small and medium scale enterprises. These businesses are also to receive working capital loans and investment purpose loans at concessional rates.
Moratoria have also been granted on leasing loans for three wheelers, small value personal banking and leasing loans. In addition, financial institutions have been requested to reschedule non- performing loans. To facilitate the provision of these concessions, lower capital conservation buffer requirements and a relaxation of loan classification rules have been announced, in addition to the availability of liquidity at reduced interest rates.
Other key initiatives include the introduction of the ‘Saubagya Covid-19 Renaissance Facility’, which provides working capital for adversely affected businesses to revive their activities. Sub loans are to be released to farmers through licensed banks under the subsidised ‘New Comprehensive Rural Credit Scheme’.