Silence in the printing blocks of RBI
Oh man they couldn’t even print some spare notes for the jobless & the homeless.
Wandering, what could have possibly happened if so many new notes would have jammed in the air, on the floor….in the cupboard? Wowww!
I would have stored candies , pizza bread & ice creams but this make me sad at the same time – that my friends would be doing the same , there would have been high demand enough that stress wouldn’t have been able to bribe the shopkeeper for ice cream then What you possible sense here? – Inflation! Right! And hyperinflation wouldn’t have been miles away then.
In the above scenario, the 10 rupees ice cream costs rupees 100 or taking a bigger look – 100rs equate to 0.14 dollars whereas a while ago 10 rupees were enough for the petty amount. Now same amount apples might not be able to impose with all the money we have. No RBI can’t trash of cut kids and their families.
So how the brains of nation coped up with the circulation of money when almost at its verge to be halted?
While you are pondering at this – have a look on the following stratagem RBI introduced regarding the same above suspicion.
Repo rate – RBI announced that it is cutting repo rate by 75 bps, or 0.75% to 4.4. The repo rate earlier was 5.15. The regulator also announced that it would cut the reverse repo rate by 90 bps or 0.90%
Loan Moratorium - In a massive relief for the middle class, the RBI governor also announced the lenders could give a moratorium of 3 months on term loans, outstanding on 1 March, 2020. This is applicable to all commercial banks including regional , rural, small finance, co-op bank and NBFCs including housing finance and microfinance ( This simply means - you got a relaxation period to repay your loans to the bank. Kudos!)
Ease of working capital financing - Lenders were allowed lending to recalculate drawing power by reducing margins or by reassessing the working capital cycle for borrowers. The RBI also specifies that such a move would not result in asset classification downgrade and a three month interest moratorium shall also be permitted to all lending institutions .
These among other policies aimed to maintain the GDP throughout the lockdown. How prudently RBI increased the cash flow in market without actually printing more papers!
Are we forgetting someone? Ya, the not so homeless or jobless people, the ones playing with stocks while their kids juggle with bowls. Anyways, the trading among businessmen, investors have been restless as ever. The production stopped, factories shutter down - there was no particular reason for why investments be made in stock market!
So the investments everywhere were being made in what? the gold-the sheen!
Gold as an asset usually shares negative correlation with other assets (such as equity, debt and real estate) and tends to perform better during risk off periods.
Investing in gold basically protects the investor’s capital against tail risks and other events that have an adverse impact on capital or worth
While demand for jewellery and physical gold has taken a hit, the focus is on investment forms of gold. Even the central banks of the world, recognizing the risk involved, are adding to their gold reserves. Gold , as you may know , plans an important role in central banks of the world , recognizing the risk involved, are adding to their gold reserves . Gold, as you may know, plays an important role in central banks reserve management. Given the on going extreme turbulence in the equities, gold holds the potential to provide respectable returns.
In the current situation, consider allocating 10-15% of the entire investment portfolio to hold and hold it with a long-term investment horizon . And gold will continue to play it's role as an effective portfolio diversifier and a store if value during economic uncertainty
Afterall , who knew everyone would be suddenly talking about economy setback and regulation on gross as well as micro scale?