RBI’S MONETARY POLICIES: CORONA 2020 Flashcards
How did the RBI’s Monetary Policy Committee (MPC) respond to the economic slowdown caused by COVID-19?
The MPC held additional meetings in March, April, and May of 2020 to address the crisis, which was beyond their usual bi-monthly schedule.
Name three key policy measures the RBI implemented to support the economy during the pandemic.
Reduced the repo rate to 4%.
Reduced the Cash Reserve Ratio (CRR) to 3%.
Introduced new loan windows like TLTROs and On-Tap Liquidity Windows.
What is the significance of the Atmanirbhar Bharat initiative?
The Atmanirbhar Bharat initiative was a government program aimed at reviving the Indian economy after the COVID-19 crisis. The RBI’s monetary policy measures were implemented in alignment with this initiative.
Explain two ways the RBI provided relief to borrowers during the pandemic.
Loan/EMI Moratorium: Borrowers were allowed to temporarily suspend loan repayments.
NPA Relief: RBI provided guidelines to help banks manage loans that were at risk of becoming non-performing assets (NPAs) due to COVID-19 related disruptions.
What was the role of the KV Kamath Committee in the RBI’s response to COVID-19?
The KV Kamath Committee was formed by the RBI to develop a framework for restructuring loans that were negatively impacted by the COVID-19 pandemic.
What is a Targeted Long-Term Repo Operation (TLTRO)?
TLTROs are special loans provided by the RBI to banks. These loans are meant to be invested in specific sectors or types of securities to boost lending and economic activity in those areas.
How did increasing the Loan-to-Value (LTV) ratio on gold loans help borrowers?
By increasing the LTV ratio from 75% to 90%, the RBI allowed borrowers to access more credit against the same amount of gold as collateral. This provided an additional source of liquidity during a time of financial hardship.
What is the purpose of a Special Refinance Facility for AIFIs?
Special Refinance Facilities provide All India Financial Institutions (AIFIs), such as development banks, with additional funding options during times of crisis. This helps them continue lending and supporting economic activity.
Why might the RBI defer the implementation of Basel Norms and Ind AS accounting standards?
The RBI might defer these norms to provide temporary relief to banks during a crisis. This allows banks to focus on managing their immediate financial challenges rather than implementing complex regulatory changes.
What are Ways and Means Advances (WMA) and why would the RBI reform them?
WMA are short-term loans provided by the RBI to the government to help with temporary cash flow mismatches. Reforms to WMA could be aimed at managing the government’s borrowing, potentially to ensure it doesn’t contribute to excess inflation.
