homeeconomy NewsCoronavirus crisis: Here are some suggestions for the govt and RBI to tackle it, says former RBI Guv YV Reddy
Coronavirus crisis: Here are some suggestions for the govt and RBI to tackle it, says former RBI Guv YV Reddy
The former RBI governor YV Reddy in an interview to CNBC-TV18 suggests various things that the central bank and the government can do to tackle the coronvairus crisis.
The former RBI governor YV Reddy who was in decision making positions through the 1991 FX crisis, the Asian crisis, the US sanctions, the Lehman crisis spoke with CNBC-TV18's Latha Venkatesh on how the central bank of the country and the government should tackle the coronavirus crisis.
He said the government and the Reserve Bank of India should resort to 'freeze the clock' that is when there is extraordinary emergency payments cannot be made. So, with the system going into freeze for a bit, all payments become due on a certain date.
The other thing that they can do is enforce credit guarantees. The Deposit Insurance and Credit Guarantee Corporation is used normally for guaranteeing deposits but the rules also allow it to guarantee credits.
Another rule that should be brought in is 'Treasury Rule 27'. Under this rule payments can be authorised, which are otherwise not allowed. Under the rule a collector can authorise a payment to the treasury officer saying just pay this bill and even if they are not authorised by the rules the treasury officer pays that bill.
According to him, there are other small things that can be done by various state initiatives. He also recommended universal income scheme.
Following are the highlights of various suggestions:
FREEZE THE CLOCK
All payments become due on a certain date.
Order allows banks and other institutions to ignore time deadlines.
Banks, tax authorities can be directed not to enforce penalties.
Deadlines for interest dues, tax dues can be set aside.
Deadlines for off balancesheet guarantees can be set aside.
Reason is to prevent a liquidity crisis from becoming a solvency crisis.
DICGC CREDIT GUARANTEES
Deposit Insurance and Credit Guarantee Corporation can be used.
DICGC can partially guarantee credit of all MSMEs.
Basis for guarantee can be a multiple of GST paid example 50% of company credit can be guaranteed or 5x GST paid can be guaranteed.
Allows banks to increase credit to MSMEs stuck for repayments.
Repayment relaxation, credit guarantee for NBFCs' borrowers as well.
TREASURY RULE 27
Payments under special authorisation of the collector.
Collector can order Treasury officer to make payment.
Measure used to make payments during floods and such emergencies.
Allow collectors to spend on testing kits, movement of people & provisions.
STATES' INITIATIVE
Different states tackling problems innovatively.
States can put their experiences/schemes in a common website.
UNIVERSAL INCOME
Everyone other than salary earners should get money in their accounts.
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