Banking regulator the Reserve Bank of India today extended the moratorium on loan repayments by three more months. The facility is now extended till August 31. The announcement was made during a media address by RBI Governor Shaktikanta Das.
So far, banks are offering moratorium to retail customers on a blanket ‘opt-out’ basis and to wholesale customers on case-to-case ‘opt-in’ basis.
Addressing a press conference post an off-cycle meeting of the Monetary Policy Committee, which decided to reduce the repo rate by a further 40 basis points, RBI Governor Shaktikanta Das said that the RBI will be rolling over a Rs 15,000 crore refinance facility for SIDBI for a period of 90 days. Further, the central bank extended the export credit period to 15 months from one year.
Dr. Joseph Thomas, Head of Research – Emkay Wealth Management said ,“The further cut in the repo rate by the RBI is more or less in line with expectations by majority of the market participants. The cut has been effected considering the fact that there is growing economic and financial stress on account of the pandemic involving all major sectors of economic activity. This would help in bringing down the market rates as also lending rates mostly at the short end of the curve. The potential reduction in the cost of funds and the extension of moratorium will be supportive of financial stability which is of extreme importance as of today.”
“We expect the rates across the curve to move lower from the current levels ,though on a risk adjusted basis , the short to medium term would hold better value for long term investor portfolios. In view of the large issues at the primary for the rest of the year from both central and state governments, the likely gains at the long end may come with elevated risks. The fall in the reverse repo rate would serve as a disincentive to banks who hold huge sums of liquidity to look at alternatives including gilts,” he added.