Table of Contents
Dollar- Rupee swap
- Coronavirus has triggered volatility in the market.
- Flight to safety has led to spike in volatility across all asset classes
- RBI made its 1st decisive move by opening a US dollar – Indian Rupee swap window for $2 billion.
- The demand for the US dollar has been surging across the world resulting in USD shortage.
- A record high foreign exchange reserves and the lowest current account deficit in living memory places the central bank to deal with the currency swings from a position of strength rather than get into a fire fighting mode as it had done during the past crises.
- The current account is expected to move to surplus in the March quarter due to a plunge in crude oil prices.
Industrial output
- January 2020: factory output growth improved
- There was a mild decline in December 2019
- Retail inflation eased in February 2020
- This will RBI the option of an immediate rate cut to counter the disruption caused by the Covid-19 pandemic.
- Data released by the statistics office on Thursday showed industrial output grew 2% in January against an upwardly revised 0.07% rise in December.
- The simultaneously released Consumer Price Index (CPI) showed retail inflation slowing to 6.58% in February from 59% in January due to softer food inflation.
- The next policy review is scheduled for the first week of April.
- The central bank said on Thursday it was prepared to take all necessary measures, raising the prospect of an early monetary review aimed at cutting rates, said experts.
- The US Federal Reserve and other central banks have already announced measures to support national economies.
YES Bank
- Government-owned State Bank of India will be joined by private lenders ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra Bank as well as investors Radhakishan Damani, Rakesh Jhunjhunwala and the Azim Premji Trust in the rescue plan for Yes Bank to invest more than Rs 12,000 crore.
- As per the proposal sent to the Reserve Bank of India (RBI), these investors will together hold more than 49%, with SBI holding the largest share at 45%.
- SBI has also recommended appointing Yes Bank administrator Prashant Kumar as the new CEO of the bank.
Private Banks
- RBI has written to chief secretaries of state governments advising them against transferring funds from private sector banks.
- Apprehension on the safety of deposits in private sector banks is highly misplaced.
- Maharashtra government had issued an order asking all of its departments and civic bodies in the state to not park money in private banks.
- Reserve Bank had adequate powers to regulate and supervise the private sector banks and by using these powers it has assured that the depositors’ money is entirely safe.
Kerosene Subsidy
- India has eliminated subsidy on kerosene through small fortnightly price increases for nearly four years amid low oil prices.
- This will enable savings for the government at a time when it is facing a revenue shortfall and raising expectations of a quick end to cooking gas subsidy that’s also being slowly cut.
- The government instructed state-run oil companies this month to price kerosene at market rates.
- Kerosene prices more than doubled to ₹36.38 a litre last month in Mumbai from ₹15.02 in July 2016.
ADB on Coronavirus
- The Asian Development Bank (ADB) will make available $200 million through its Supply Chain Finance Program for companies manufacturing and distributing medicines and other items needed to combat the novel coronavirus (COVID-19).
- The support from ADB, working in partnership with commercial banks, will provide such companies in Asia and the Pacific with additional working capital to meet expansion and other requirements.
- ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty.
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