Repeat Repo

The Hindu Newsletter - Repeat Repo

	Friday 17, April 2020

The Evening Wrap Welcome to the Evening Wrap newsletter, your guide to the day’s biggest stories, with concise analysis from The Hindu. We hope you are staying home and staying safe. Here are the big stories that you need to follow today:  Repeat Repo  The RBI today came up with another round of measures to counter the economic slowdown. They are aimed at discouraging banks from parking excess funds with the central bank and pushing them toward investments and loans that can revive growth.  The RBI has cut its reverse repo rate (the rate at which banks earn interest on funds they park with the RBI) by a further 25 basis points to 3.75 percent, decreasing the incentive for commercial banks to park their funds with the RBI. Earlier, on March 27, the central bank had slashed the repo rate (the interest rate at which the top bank lends to commercial banks) by 75 basis points to 4.4%. The reverse repo rate was also cut by 90 basis points to 4%. It had permitted all commercial banks and non-banking financial corporations (NBFCs) to allow a three-month EMI moratorium on all term loans. Those measures evidently haven’t been adequate, as the central bank still feels there is excess liquidity in the system. It has now announced a ₹50,000 crore targeted long-term repo operation (named TLTRO 2.0) to help ease the liquidity crisis facing NBFCs and microfinance institutions (MFIs). Banks availing these funds will have to lend at least 50% of it to medium and small NBFCs and MFIs. The LTRO is a tool through which banks get funds from the central bank for a longer duration (one to three years), at a cheaper rate, by providing government securities with a similar tenure as collateral. With TLTRO, this lending operation gets ‘targeted’ towards channelling funds to NBFCs and MFIs, whose collections have, of late, dried up due to the COVID-19-linked EMI moratoriums. The earlier TLTRO scheme (TLTRO 1.0, as it were) had benefited mostly larger corporations and PSUs. “The overarching objective is to keep the financial system and financial markets sound, liquid, and smoothly functioning so that so that finance keeps flowing to all stakeholders, especially those that are disadvantaged and vulnerable,” RBI governor Shaktikanta Das said.  Covid Watch: Numbers and Developments The number of people infected with COVID-19 rose to 14,048, with 483 deaths at the time of writing this newsletter.  The Health Ministry today said that the doubling rate of positive cases is currently down to 6.2 days, compared to 3 days before the nationwide lockdown that started last month. “Also, India has registered an average growth factor of 1.2 % since April 1 as compared to 2.1 in the preceding two weeks (March 15-31), which represents a 40% decline in growth factor,” a spokesperson said. He added that 19 States/UTs (Kerala, Uttarakhand, Haryana, Ladakh, Himachal, Chandigarh, Puducherry, Bihar, Odisha, Telangana, Tamil Nadu, Andhra Pradesh, Delhi, UP, Karnataka, J&K, Punjab, Assam, Tripura) have shown a lower rate of increase of cases to some extent. ‘Inadequate financial package’ In an interview to The Hindu, Kerala Chief Minister Pinarayi Vijayan said the Centre’s financial package, at just 0.7% of the GDP, is inadequate.  “States with their limited resources will have to shoulder the greater burden of the economic crisis that will follow the COVID-19 pandemic. The financial package announced by the Centre is inadequate. Altogether just ₹7,000 crore has been allotted additionally to the States. Many countries, including the U.S.A., the U.K., and Japan have announced financial stimulus packages ranging between 12%-20% of their GDP. Our stimulus package is just 0.7% of the GDP. I do hope that the Union Government comes out with a large and substantive package to support the States, who are the primary responders.” Wuhan fatalities revised China's Wuhan city, the epicentre of the coronavirus outbreak, said it has done an upward revision of its total coronavirus death toll by 1,290, admitting that many cases were “mistakenly reported” or missed entirely, according to state-run CCTV. That brings the total number of deaths in the city to 3,869. The change also pushes the nationwide death toll up by nearly 39% to 4,632, based on official national data released earlier on Friday. In brief:  The Centre made some new additions to the list of activities that will be allowed from April 20 in some parts of the country not classified as pandemic hotspots. NBFCs and MFIs will be allowed to resume services. Coconut, spice bamboo, areca nut and cocoa plantations, and forest produce by scheduled tribes have also been added to the list. The Centre has removed restrictions on the export of paracetamol formulations. However, the restriction on the export of active pharmaceutical ingredients (APIs) of paracetamol will remain in place. Hundreds attended a temple festival in the Kalaburagi district of Karnataka, in violation of social distancing rules. Deputy Commissioner B. Sharat placed Chittapur Child Development Project Officer Rajkumar Rathod, who was designated as Sectoral Magistrate, under suspension on the same evening pending an enquiry. Evening Wrap will return on Monday.

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