Daily Financial News Analysis – 28th Mar’20

Table of Contents

DAS INJECTS MUCH-NEEDED CAPITAL

RBI announced a series of emergency measures
Boosting liquidity by ₹3.7 lakh crore
“A war effort has to be mounted and is being mounted to combat the virus, involving both conventional and unconventional measures in continuous battle-ready mode,” governor Shaktikanta Das said.
Since the last MPC (Monetary Policy Committee) meeting of February 2020, the Reserve Bank has injected liquidity of ₹2.8 lakh crore through various instruments, equivalent to 1.4% of our GDP.
Together with the measures announced today (Friday), RBI’s liquidity injection works out to about 3.2% of GDP.
State Bank of India said late on Friday that it would pass on the 75 bps cut to borrowers of loans.
Notably, the monetary policy committee scrapped the inflation and growth forecasts for the year as the impact of Covid-19 is unpredictable.
The six-member monetary policy committee (MPC), which met ahead of schedule, voted four to two in favour of the cut.

RBI slashed the cash reserve rate (CRR) by 100 basis points to 3% of bank deposits, straight away unleashing Rs 1.37 lakh crore into the banking system for the next one year.
It also allowed banks to borrow an additional 1% from their investments of statutory liquidity ratio (SLR) securities making available another Rs 1.37 lakh crore for banks to borrow.
Banks have also been given an option to borrow three-year funds up to Rs 1 lakh crore through the so called targeted long-term repos, the first of which was conducted for Rs 25,000 crore on Friday.

It has sharply cut India’s growth forecast for calendar 2020 to 2.5% from 5.3% estimated.
The ratings company estimates a 5% growth for calendar 2019.
Global Macro Outlook 2020-21: the 21-day lockdown announced by Prime Minister Narendra Modi would result in a sharp loss in incomes and further weigh on domestic demand and the pace of recovery.
Advanced economies are seen contracting 2% in 2020 against 1.7% growth in 2019 while emerging economies will slow to 1.9% from 4.2%.
The downside risks to growth remain sizable.

India has proposed a common electronic platform for all Saarc nations to share and exchange information, knowledge, expertise and best practices for jointly combating the Covid-19 pandemic.
This proposal was made at a meeting of Saarc health officials on Thursday evening.
The Indian side further proposed that till such time the electronic platform is fully operational, a network of experts representing the health services of all Saarc countries may set up an e-mail and WhatsApp group to exchange all relevant information on a real time basis, according to officials.
Platform which could also serve as a multipurpose vehicle to further discuss and conduct activities.