Proactive or watchful? Here's how D-St interpreted RBI Governor's address

Call it 'pro-active thinking' or a more 'watchful move', the Reserve Bank of India (RBI) Governor's unscheduled address today definitely cheered the Street.

RBI Governor Shaktikanta Das on Wednesday revealed the central bank's blueprint to mitigate the impact of the second Covid wave that's wreaking havoc in the country. Most of the measures announced by the RBI Governor centred around boosting liquidity which analysts believe will support the economy and businesses.

Some of the measures announced included - term liquidity of Rs 50,000 crore as on-tap liquidity for access to the emergency health facility, three-year TLTRO for small finance banks, another instalment of G-SAP of Rs 35,000 crore and lending by SFBs to MSMEs to be classified as priority sector lending.

But no announcement on the moratorium front surprised some. What does this signal and what it means for the banking sector? And can the lure of 40 bps additional interest be enough to push banks into creating a Covid loan book at a time when they are struggling to manage regular operations?

Moreover, Das also signalled the situation has altered on the economic front and MPC will take cognisance of the same in its next policy meeting slated in June. Will this lead RBI to change its inflation forecast and what should one expect from the next MPC outcome?

We seek answers to these questions and more as we interact with Ajit Mishra, VP - Research at Religare Broking and Kajal Gandhi, banking research analyst at ICICI Securities.