Comprehensive measures announced by the central bank
View on RBI Monetary Policy by Shanti Ekambaram, Group President - Consumer Banking, Kotak Mahindra Bank
The Monetary Policy Committee today announced a set of comprehensive measures to address liquidity, easing financial pressures on businesses and providing enough support to help the financial system battle the consequences of the COVID-19 pandemic.
The MPC cut the repo rate by a significant 75 basis points to 4.40% and the reverse repo by 90 basis points to 4% - both these are significant moves that will help lower cost of funds and enhance liquidity in the system. The stance was unanimously "accommodative".
Liquidity measures announced were to the tune of Rs 3.74 lakh crore across three measures comprising Long Term Repo Operation (LTRO), CRR cut of 100 bps and the increase in marginal standing facility (MSF) to 3% of the Statutory Liquidity Ratio (SLR). That is a large amount of liquidity injection into the financial system that should help financial institutions and flow of funds to the real economy.
The construct of the LTRO - towards incremental investment by way of CPs, NCDs and Corporate Bonds is interesting.
Measures to ease financial pressures on businesses and individuals by way of a moratorium of 3 months on term loan repayments, interest on working capital facilities and easing of working capital norms will bring big relief to small and medium sized companies and individual borrowers. The move will also help banks as these will not be classified as NPAs.
Most reassuring were the statements by RBI that they will continue to stay very vigilant and will do what it takes to support the economy in the wake of the pandemic, through both conventional and unconventional instruments.
In summary, these are significant measures which will help all participants in the economy during these unprecedented times.
Shares of KOTAK MAHINDRA BANK LTD. was last trading in BSE at Rs.1389 as compared to the previous close of Rs. 1290.15. The total number of shares traded during the day was 286907 in over 16052 trades.
The stock hit an intraday high of Rs. 1419.15 and intraday low of 1255.05. The net turnover during the day was Rs. 385519329.