Need to ensure funds for industry, says RBI as it embarks to start massive borrowing for govt

Tribune News Service
New Delhi, February 5

The Reserve Bank announced several measures to maintain availability of funds in the market for the industry even as it embarks on meeting the Union government’s target of raising Rs 12 lakh crore in debt during 2021-22.

The apex bank’s monetary policy committee decided to make no changes in the interest rates as the “need of the hour is to back growth”, RBI Governor Shaktikanta Das said at a press conference on Friday.

Das was satisfied with the retail inflation rate which was 4.59 per cent in December 2020, well below the upper ceiling of six per cent.

Das announced several steps to ensure funds for the industry do not get crowded out as the RBI raises Rs 12 lakh crore for the government in a “non-disruptive” manner.

At the same time, the RBI is taking steps to keep at bay hot money from abroad in search for good yields.

Das said one of the steps is a graded restoration of the cash reserve ratio (CRR) which will be fully restored to pre-COVID period only on May 22, thus giving banks more time to have some extra credit at their disposal.

Besides, banks will be allowed to deduct credit disbursed to new MSME borrowers from their liabilities for calculating CRR.

So far excluded, NBFCs, well-known for reaching out to the last mile in several sectors, will be permitted to join the Rs 1-lakh-crore TLTRO on tap (targeted long term repo operations) for banks in certain stressed sectors.

Relaxation given on some norms to banks that had freed up funds has been extended for another six months.

This will put Rs 1.53 lakh crore at the disposal of the banks. Banks have also been allowed to hold a higher proportion of longer duration securities as part of the statutory liquidity reserve (SLR).

Das said India will become among the few countries to permit retail investment in Government Securities. Indians will be allowed to make remittances to International Financial Service Centres (IFSCs) while foreign portfolio investors can invest in defaulted corporate bonds.