Finance minister Nirmala Sitharaman on Friday asked banks for “quick transmission” of slashed interest rates by the Reserve Bank of India to boost liquidity in the system to deal with the coronavirus pandemic.

“Appreciate Shaktikanta Das’s reassuring words on financial stability... slashed interest rate needs quick transmission,” she said in a tweet.

The three-month moratorium on payments of term loan instalments (EMI) and interest on working capital will give the much-desired relief, she added.

She also welcomed the RBI governor’s statement that the macro-economic fundamentals of the Indian economy were sound and, in fact, stronger than what they were in the aftermath of the global financial crisis of 2008-09.

As the RBI cuts lending rates, it creates space for banks to reduce interest rates on retail loans, which would eventually help the common man and businesses.

Prime Minister Narendra Modi on Friday said the RBI has taken giant steps to safeguard our economy from the impact of the coronavirus. The announcements will improve liquidity, reduce the cost of funds and help the middle class and businesses.

Professor Govinda Rao, a former member of the PMEAC, said, “The announcements and measures are timely but one needs to be very careful about how the situation unfolds in the coming days.”

“The income of banks may suffer in the short-run as no/less repayment of loans will be there. On the external front, the RBI allowed Indian banks to participate in the offshore NDF markets, mainly with a view to contain volatility in the domestic currency. This decision will reduce the arbitrage in the onshore and offshore markets and, thereby, improve depth and price discovery in the forex market in the coming days. Volumes will, of course, depend on the fact as to how fast the Indian banks are able to appropriate the required infrastructure, IT and the accounting systems,” Soumya Kanti Ghosh, group chief economic advisor, State Bank of India, said in a report.

Chandrajit Banerjee, the director general of CII, said, “Given that the current lockdown is expected to have a negative impact on the cash flows of companies, the moratorium on repayments of term loans for a period of three months will help companies tide themselves over this period. However, the CII would urge that this period be extended further in case the impact of the virus outbreak lasts longer than expected. The RBI governor did well to provide the assurance that all instruments are on the table to protect the economy and the financial system from either an excessive downturn or volatility.”