The RBI’s liquidity facility for mutual funds will be effective from today till May 11, 2020 or up to utilization of the allocated amount, whichever is earlier.

The RBI also assured that it will review the timeline and amount, depending upon market conditions.
Under this facility, the RBI will provide funds to banks at lower rates and banks can avail funds for exclusively meeting the liquidity requirements of mutual funds.

Banks can extend loans to mutual funds, undertaking outright purchase of and/or repos against the collateral of investment grade corporate bonds, commercial papers (CPs), debentures and certificates of deposit (CDs) held by mutual funds.

The RBI shall conduct repo operations of 90 days tenor at the fixed repo rate.

This liquidity facility is on-tap and open-ended, and banks can submit their bids to avail funding on any day from Monday to Friday (excluding holidays).

The RBI reiterated that it “remains vigilant and will take whatever steps are necessary to mitigate the economic impact of COVID-19 and preserve financial stability.”

The RBI however said that stress is confined to the high-risk debt mutual fund segment at this stage.

“The larger industry remains liquid,” the central bank said.

“Heightened volatility in capital markets in reaction to COVID-19 has imposed liquidity strains on mutual funds (MFs), which have intensified in the wake of redemption pressures related to closure of some debt MFs and potential contagious effects therefrom,” the RBI said.

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The fund will be managed by the National Health Mission (NHM), National Center for Disease Control (NCDC) and Indian Council of Medical Research (ICMR) under the Ministry of Health and Family Welfare and will cover all states and union territories (UTs).

It will address the needs of infected people, at-risk populations, medical and emergency personnel and service providers, medical and testing facilities, and national and animal health agencies.

The fund will be utilised for procurement of testing kits, setting up of new isolation wards–including turning hospital beds into intensive care unit beds–infection prevention and control, and purchase of personal protective equipment, ventilators, and medicines, particularly for district hospitals and designated infectious disease hospitals.

The project will immediately enable the government of India to scale-up efforts to limit human-to-human transmission, including reducing local transmission of cases and containing the epidemic from progressing further,” the World Bank said in a statement.

“In parallel, interventions to strengthen the health system will be rolled out to improve the country’s capacity to respond to the covid-19 epidemic and be better prepared to respond to emerging disease outbreaks, including transmission between humans and animals,” the international body added.

India has imposed a 21-day nationwide lockdown till 14 April to limit the spread of coronavirus.
World Bank Country Director for India Junaid Ahmad said the Bank is working closely with the Indian government to provide urgent and flexible support to the country as it fights the spread of covid-19.

“This operation is expected to enhance surveillance capacities, strengthen diagnostic systems, and expand the capacity of laboratories. But, covid-19 is not only a health challenge. It has deep social and economic implications. In parallel, we are working with equal urgency with government on social protection programs and economic measures that protect the livelihoods of people,” Ahmad said.

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According to the newly effective interest rate, FD having tenor of 7 to 45 days will earn 4 per cent instead of 4.5 per cent earlier.

FD rates for tenure of one-year and above have been reduced by 10 bps. The one year FD will now earn 5.9 per cent instead of 6 per cent earlier.

This is the second time bank has reduced rates in one month. In February the PSU bank reduced FD rates by 10-50 bps. The back-to-back rate cuts have come despite RBI maintaining status quo in its monetary policy announcement in the month of February.

In should be noted that FD rates applicable for tenure of 46 days to 179 days, 180 days to 210 days and 211 days to less than one year have been kept unchanged.

The PSU bank has als0 reduced the MCLR rates by up to 15 bps.

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Following proposals put forward by NITI Aayog with respect to the arbitrations by/against Government Entities were approved:

(i)  Government Entities will take the decision to initiate proceedings for setting aside of the arbitral award, and any appeal(s) thereto, with the opinion of a Law Officer i.e. Attorney-General for India / the Solicitor-General for India / the Additional Solicitor-General for India, in consultation with Department of Legal Affairs.

(ii) Where a Government Entity has challenged an arbitral award, resultant of which the amount of the arbitral award has not been paid, 75% of such award will be paid by the Government Entity to the contractor / concessionaire against a bank guarantee only for the said 75% and not for its interest component. With respect to the interest payable to the Government. Entity, should the subsequent court order require refund of the said 75%, payment of the same will be as per court order.

The above order is applicable to Government Entities i.e. all Public Sector Undertakings of the Central Government, Autonomous Organisations of the Central Government, Special Purpose Vehicles (SPV) where 50% (fifty per cent) or more of the paid-up share capital is held by the Central Government, and all Central Government Departments.

Major Impact:

These approved measures would help in ensuring that the remedies of challenge/appeal are resorted to in a prudent and judicious manner, and in furthering the objective of infusion of liquidity into the construction sector. Given the significant multiplier effect the construction sector has on the economy, these are expected to give a major boost to economic growth. And as the sector that provides one of the largest segments of direct and indirect employment, its revival would also help in significant employment generation.

Over the last few years, an increasing number of infrastructure projects in the construction sector have been / are subject of prolonged legal proceedings. In a substantial number of these projects which go into arbitration, payment of award is not released to the contractor / concessionaire for the award is challenged in court.

Challenge of the award, in most cases, defers the payment of the arbitral award pending the decision in challenge/appeal, which process then takes years to attain finality. This is seen to cause severe liquidity constraints in the construction sector as the large sums of money raised by contractors / concessionaires for execution of projects get blocked – stressing their balance sheets. The foregoing then causes a ripple effect throughout the financial ecosystem – directly impacting the repayment of debt to lenders, leading to increasing Non-Performing Assets (NPAs) in their balance sheets.

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Mumbai: To further the role of financial inclusion in economic growth, we require to focus on collective active participation rather than just banking on the government initiatives, feel the experts at the Seminar on Financial inclusion organized by CSR Research Foundation here in Mumbai.

The theme of the seminar – way to people, planet and prosperity, rightly focused on the need of the hour to create a balance between growth and environment and ensure prosperity to have inclusive economic growth. The MOS for Social Justice and empowerment Shri Ramdas Athawale emphasized on the role of CSR in creating a business environment to further industrial growth and creating employment in the state. He emphasized on the role of financial inclusion and corporate social responsibility in the growth of the country and employment.

Shri Gopal Krishna Agarwal, BJP National spokesperson for economic affairs said that now time has come to move to the next level of financial inclusion which means to provide equal opportunity to all in the financial markets.

Organizing secretary of Bharat Vikash Parishad Shri Suresh Jain emphasized on the role of social inclusion to achieve financial inclusion and appealed to the corporate and banking sector to come forward to play an important ant role in the growth of the country.

The chairman of the CSR research Foundation Shri Deendayal Agarwal welcomed all the participants from more than 40 banks and financial institutions. Director Reserve Bank of India Satish Kashinath Marathe, Vice Chairman Rail Land Development Authority V P Dudeja, Dy CEO IIFCL Projects LTD Palash Shrivastava, Former Director Bank of India Veni Thapar, GM SBI Ananthanarayanan A, Bank Of Maharashtra Director R Thamodharan, Executive Director LIC (micro Finance) T R Mendiratta, Former Director ONGC V P Mahawar among the others were present on this occasion.

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