Covid-19 better than ever with the country’s financial situation improving rapidly: CRISIL
India’s financial situation has improved rapidly after the stuttering caused by the Covid-19. It is now better than the epidemic caused by the coronavirus. These things are known from the Financial Condition Index of CRISIL Research. According to CRISIL Research, the biggest reason for the big improvement in the country’s financial situation is the Reserve Bank of India (RBI).
RBI’s steps helped in reducing short term pressure on the economy
CRISIL has written in its report that the RBI has taken steps with the central banks of other countries to support the economy of the country. Its steps have made up for the macroeconomic losses caused by Covid-19. According to CRISIL, India has benefited from a monetary policy promoting the global economy around the world. The steps taken by the RBI have helped in reducing the short term pressure built on the economy.
The big benefit from policy rate reduction and increased level of cash
To improve the country’s financial condition, this year saw a significant role in policy rate cuts, increased cash and investment in markets, increased foreign exchange flows and favorable global conditions. In early October 2020, Reserve Bank Governor Shaktikanta Das said that the RBI is ready to take all necessary steps to keep market participants’ access to cash and easing financial conditions.
Money and debt market supported by liberal monetary policy
RBI has reduced the repo rate to 115 basis points and reverse repo to 155 basis points since March (100 basis point equals 1 percentage point). It also bought government securities worth Rs 1.9 lakh crore on net basis till September. It bought government securities worth Rs 0.9 lakh crore during the last financial year. According to CRISIL, these measures of RBI have reduced the interest rate of money market and debt market. This has resulted in a fall in the interest rates of banks to some extent.
Loan growth of banks may hit several decade low
There are still some major hurdles in the country’s financial sector. The loan growth of the already declining banks due to Covid-19 has further reduced in recent months. CRISIL estimates that its loan growth could fall to several decades of 0-1% in the current financial year. The increased borrowing of the government and the pressure created in the corporate bond market is also increasing the problem of the financial sector.
The financial situation of the country is deteriorating since IL&FS default
The financial situation of the country has been deteriorating since the default of IL&FS in 2018. Due to that crisis, the country’s non-banking financial companies (NBFCs) were short of cash. This problem of the NBFC sector was increased due to Covid-19. The country’s financial situation had become the weakest in a decade since the lockdown began in April this year.
