21:20 GMT30 November 2020
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    Coronavirus Outbreak Turns Into Pandemic (233)

    New Delhi (Sputnik): The US Federal Reserve reduced its benchmark interest rate to zero. The European Central Bank (ECB) has not yet announced a rate cut but has taken other measures to support European economies in the wake of Covid-19.

    At a time when central banks across the world have announced emergency rate cuts in the wake of the Covid-19 pandemic, India’s Reserve Bank of India (RBI) on Monday refrained from cuts, but announced several measures to ensure liquidity and support the Indian currency.

    RBI maintained that India is not immune to the Covid-19 pandemic. It said that a decision on interest rates will be taken “depending on the emerging situation”. RBI Governor Shaktikanta Das said: “Our effort is to see that our responses are neither premature nor delayed.”

    In India, monetary policy decisions are taken by the Monetary Policy Committee, which meets four times in a year. An out of turn meeting of the committee can be called by the RBI governor, if the “RBI Governor is of that opinion”.   

    “Covid-19 could impact economic activity in India. Tourism, aviation, hospitality are suffering from loss of activity. Forex and bond markets are also not immune to the current volatile situation. RBI has several policy instruments and stands ready as and when required,” Das said, adding that emerging markets are experiencing volatility due to Covid-19. 

    The RBI Governor announced liquidity measures including long term repo operations worth $13.51 billion.

    A Rupee-Dollar swap auction worth $2 billion will be held on 23 March, and should help the RBI infuse liquidity in the banking system by swapping US Dollars from banks with Indian currency at the spot rate. Banks would have to pay back the Indian currency to the RBI - plus a premium - at the end of the swap period.

    In addition, the RBI also issued a set of instructions to the banks in the wake of Covid-19 fight. In a circular issued ahead of the governor’s press conference, the central bank asked banks to take stock of critical processes and revisit their business continuity plans. RBI has also asked banks to encourage its customers to use digital banking.

    RBI also stressed the need to “assess the impact on balance sheet, asset quality, liquidity arising out of potential scenarios such as further spread of Covid-19”.

    Coronavirus Outbreak Turns Into Pandemic (233)


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    Economy, coronavirus, COVID-19, Reserve Bank of India, New Delhi, India
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