Besides, the RBI Governor Shaktikanta Das said the GDP growth in FY21 is expected to be in the negative territory. The RBI also slashed repo rate by 40 basis points (bps) to 4 per cent and maintained the stance 'accommodative'. Consequently, reverse repo rate now stands at 3.35 per cent from 3.75 per cent earlier.
"India is seeing a collapse of demand. Private consumption has seen the biggest blow due to the Covid-19 outbreak, investment demand has halted. The government revenues have been impacted severely due to slowdown in economic activity," RBI governor Shaktikanta Das said.
"The fact that the central bank has refrained from giving a GDP growth figure is a reflection of the complexity in giving projections with the present growth models," said VK Vijayakumar- Chief Investment Strategist at Geojit Financial Services.
AU Small Finance Bank was locked in the 5 per cent lower circuit band at Rs 399.95 on the BSE at 10:56 am. Bajaj Finance declined 5.6 per cent to hit 52-week low of Rs 1,876.25, while SBI tumbled 1.5 per cent to hit 52-week low of Rs 149.55.
Furthermore, Union Bank of India, Power Finance Corporation and Mahindra & Mahindra Financial Services, too, hit their respective 52-week lows in intra-day trade today.
Axis Bank, Bandhan Bank, Housing Development Finance Corporation (HDFC), Shriram Transport Finance Company, Repco Home Finance, Ujjivan Financial Services, ICICI Bank, Muthoot Finance and Federal Bank were down in the range of 4 per cent to 8 per cent on the National Stock Exchange (NSE).
Nifty Financial Services, Nifty Bank and Nifty Private Bank indices skid 3 per cent, as compared to a 1.2 per cent decline in the benchmark Nifty 50 index.
The MPC is of the view that the macroeconomic impact of the pandemic is turning out to be more severe than initially anticipated, and various sectors of the economy are experiencing acute stress. The impact of the shock has been compounded by the interaction of supply disruptions and demand compression.
Meanwhile, the outbreak of Covid-19 has affected the pace of the IBC (Insolvency and Bankruptcy Code) resolution process. The finance minister announced several amendments, such as the minimum threshold would be increased to Rs 10 million from Rs 1 million, no new insolvency proceedings would be initiated for up to one year, and COVID-19-related debt would be kept out of the definition of default.
While this is likely to slow the process of resolution, it is necessary under the current circumstances. Furthermore, the extension of the resolution timeline by 90 days from the existing 180 days would ease the additional provisioning requirement, offering some respite on provisioning to underlying banks, Motilal Oswal Securities said in financials sector update.