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RBI Governor stresses on need to step up credit flow

However, the response has been lacklustre with banks borrowing a mere `2,000 crore, implying that the crisis among mutual funds isn’t as severe.

Published: 03rd May 2020 11:19 AM  |   Last Updated: 03rd May 2020 11:19 AM   |  A+A-

RBI Governor Shaktikanta Das

RBI Governor Shaktikanta Das (File photo | PTI)

By Express News Service

HYDERABAD:   Reserve Bank of India (RBI) Governor Shaktikanta Das on Saturday reiterated the need to improve credit flow, particularly extending working capital to MSMEs besides implementing the 3-month moratorium in toto. Interacting with the chiefs of major public and private sector banks via a video conference on Saturday, Das acknowledged the banking officials’ contribution during the lockdown and discussed the current economic situation in the country.

Reviewing the current situation, he underscored the need to step up credit flow to different sectors including non-banking financial companies (NBFCs), micro finance institutions, housing finance firms and mutual funds. Last week, the central bank even opened a Rs 50,000 crore special liquidity window to enable mutual fund houses to tide over the crisis.

However, the response has been lacklustre with banks borrowing a mere Rs 2,000 crore, implying that the crisis among mutual funds isn’t as severe. Despite RBI reducing the reverse repo rate to 3.25 per cent discouraging banks from sitting on cash, they continued to park suplus funds with the central bank, and as much as Rs 7 lakh crore is parked under the reverse repo window.

Some of the other topics discussed during the meeting included post lockdown credit flows including provision of working capital with special focus on credit flows to small businesses, implementation of three months moratorium on repayment of loan instalments announced by the RBI, monitoring of overseas branches of banks in view of the slowdown in economies across the globe and stability of the financial sector, the central bank said in a statement.

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