In continuation to RBI announcements dated March 27, 2020, the RBI announced additional liquidity and regulatory measures to improve the system liquidity and to improve credit spreads.

1. RBI’s Monetary Easing 2.0
In continuation to the Seventh Bi-monthly Monetary Policy Statement 2019-20
on March 27, 2020, RBI has come out with a policy announcement today, the
17th of April, in the wake of the ongoing Covid-19 pandemic.
Impact Analysis
Key Reforms Likely Impact
1. RBI Cuts Reverse Repo Rate: The RBI slashed the reverse repo rate by 25
bps to 3.75 percent. The repo rate remains unchanged at 4.40 percent
Reduction in reverse repo rate is likely to disincentive
banks from parking funds in reverse repo and lend to
commercial sector.
2. Refinancing Facilities: RBI decided to provide special refinance facilities to
NABARD (National Bank for Agriculture and Rural Development), SIDBI (Small
Industries Development Bank of India), NHB (National Housing Bank) of
Rs.25,000crs, Rs.15,000crs Rs.10,000crs respectively to address their
respective sectorial credit needs. Advances under these facilities will be
charged as per the RBI policy repo rate of 4.40 percent.
Additional refinance to NABARD, SIDBI and NHB to the
extent of Rs.50,000cr is likely to reduce market borrowing
pressures from these financial institutions and facilitate
them with meeting their respective sectorial credit
requirements.
3. Measures for NBFC :
A. Liquidity Measures: RBI came up with TLTRO-2.0 (Targeted Long Term
Repo Rate) for amount of Rs.50,000crs to begin with, in tranches of
appropriate sizes. They might step up this amount as per requirement. Of
this, at least 50 percent of the amount is required be invested in bonds,
Commercial Papers, Non-Convertible Debentures of mid and small size
NBFC's and MFI's
B. Loans to Commercial real estate projects: The date for
commencement for commercial operations (DCCO) in respect of loans to
commercial real estate projects delayed for reasons beyond the control of
promoters can be extended by an additional one year, over and above the
one-year extension permitted in normal course, without treating the same
as restructuring. It has now been decided to extend a similar treatment to
loans given by NBFCs to commercial real estate which was earlier
restricted to only banks.
These liquidity steps in particular for smaller NBFCs and
MFIs will improve liquidity for the sector and lead to
correction in high credit spreads. Real estate NBFCs with
developer exposure benefit on the asset side as well given
the extension of date for commencement for commercial
operations (DCCO) by 1 year for commercial real estate
would enable the NBFCs to find solution for delayed
projects. This would enable real estate developers to
complete the project and could lead to improvement of
asset quality for NBFC.
4. Lowers Liquidity Coverage Ratio (LCR) Requirement: LCR requirement
for scheduled commercial banks is being brought down to 80 percent from
100 percent with immediate effect. It will be brought back up gradually post
subsequent reviews
Reduction in LCR requirement for banks from 100 percent
to 80 percent is likely to boost liquidity in the banking
system which can help in lending activity.
5. On Banking Regulations:
- In respect of all accounts for which Banks and Financial Institutions grant
a moratorium, the 90-day NPA norm will exclude moratorium period.
Hence, the asset classification will stand still for all accounts where
moratorium is granted. Banks are expected to maintain additional
provision of 10 percent on all such accounts over two quarters.
- NBFCs will also have the flexibility to consider such relief to their
borrowers.
- Scheduled commercial banks and Co-operative banks will not make any
further dividend payouts for profits from FY20 until further instructions.
As opening balance is not going to be considered as NPA,
some pressure on the bank capital is released.
Bar on dividend payout gives the banking system
additional capital which would enable them to absorb
credit cost.
6. WAYS & MEANS advances for State Government increased to 60% This will enable state's to smoothen their borrowing
program and hence will ensure that SDL supply is well
spread out over the complete financial year. This in-turn
will avoid any distortion in the SDL rates

2. In continuation to RBI announcements dated March 27, 2020, the RBI announced additional liquidity and regulatory measures to
improve the system liquidity and to improve credit spreads.
Our View
• Expansion of Liquidity Adjustment Facility (LAF) corridor is similar to a 25 bps rate cut and may disincentive banks from parking
funds in reverse repo and lend to commercial sector. However, we believe putting a certain cap on the reverse repo transactions
may have higher impact on the lending activity of banks
• Sectoral oriented measures like TLTRO 2.0 for NBFC/ HFC and refinancing facilities to NABARD, SIDBI and NHB should be
positive for the overall system as these institutions play a crucial role in meeting the long-term funding requirements of
agriculture and the rural sector, small industries, housing finance companies, NBFCs and MFIs.
• While this is a good starting point, we need to wait and see how much the banks are willing to invest in small and mid-sized
NBFC papers
• RBI in its closing remarks highlighted that it expects inflation and growth to slow down further, there exists policy space to cut
interest rates further and more measures are likely to be announced in the coming weeks and months to ensure smooth
functioning of markets and for preserving financial stability.
• Going forward, we believe RBI may continue with its 'Whatever it takes' stance to support the financial markets, however the
intensity of the future policy response will depend on the depth and duration of the disruptions due to COVID-19.
• On the fiscal side, we are comfortable with Government taking measures to combat COVID-19 impact due to absence of private
credit demand (No crowding-out effect).
• Keeping the above in mind, we believe the near term appears to be bullish for bond markets. Hence, we have added duration
across our portfolios.
• Our tactical call seeks to benefit from our bullish view in the short term by taking tactical positions on the longer end of the yield
curve. Hence, we believe that the best strategy may be to create a portfolio with maturity upto 5 years with combination of
short term assets and long term assets.
• Finally, focus should be on accumulating good credit quality spread assets to give better carry to the portfolio with tactical
exposure towards longer term assets to give the capital appreciation flavour.
Our View
Scheme Recommendations
Cash Management
Schemes
ICICI Prudential Savings Fund
ICICI Prudential Floating Interest Fund
ICICI Prudential Ultra Short Term Fund
ICICI Prudential Money Market Fund
These schemes may
benefit from better risk
adjusted returns
Short Duration
Schemes
ICICI Prudential Short Term Fund
ICICI Prudential Banking & PSU Debt Fund
ICICI Prudential Corporate Bond Fund
These schemes may
benefit from mitigating
interest rate volatility
Accrual Schemes ICICI Prudential Credit Risk Fund
ICICI Prudential Medium Term Bond Fund
These schemes may
benefit from capturing
yields at elevated levels
Dynamic Duration
Scheme
ICICI Prudential All Seasons Bond Fund This scheme may benefit
from volatility by actively
managing duration
RBI’s Monetary Easing 2.0

3. Disclaimer
Scheme Risk-o-meters
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
None of the aforesaid recommendations are based on any assumptions. These are purely for reference and the investors are requested to consult their financial
advisors before investing. All data/information used in the preparation of this material is specific to a time and may or may not be relevant in future post issuance of
this material. ICICI Prudential Asset Management Company Limited (the AMC) takes no responsibility of updating any data/information in this material from time to
time. The AMC (including its affiliates), ICICI Prudential Mutual Fund (the Fund), ICICI Prudential Trust Limited (the Trust) and any of its officers, directors, personnel
and employees, shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also
any loss of profit in any way arising from the use of this material in any manner. Nothing contained in this document shall be construed to be an investment advice
or an assurance of the benefits of investing in the any of the Schemes of the Fund. Sectors/stocks mentioned in the article do not constitute any recommendation
and the Fund through its schemes may or may not have any future position in these sectors/stocks. Recipient alone shall be fully responsible for any decision taken
on the basis of this document. The information contained herein is only for the purpose of information and not for distribution and do not constitute an offer to buy
or sell or solicitation of any offer to buy or sell any securities or financial instruments in the United States of America ("US") and/or Canada or for the benefit of US
persons (being persons falling within the definition of the term "US Person" under the US Securities Act, 1933, as amended) or persons residing in Canada.
ICICI Prudential Short Term Fund (An open ended short term debt scheme investing in instruments such that
the Macaulay duration of the portfolio is between 1 Year and 3 Years) is suitable for investors who are seeking*:
• Short term income generation and capital appreciation solution
• A debt fund that aims to generate income by investing in a range of debt and money market instruments of
various maturities
ICICI Prudential Credit Risk Fund (An open ended debt scheme predominantly investing in AA and below rated
corporate bonds) is suitable for investors who are seeking*:
 Medium term savings
 A debt scheme that aims to generate income through investing predominantly in AA and below rated
corporate bonds while maintaining the optimum balance of yield, safety and liquidity
ICICI Prudential Medium Term Bond Fund (An open ended medium term debt scheme investing in instruments
such that the Macaulay duration of the portfolio is between 3 Years and 4 Years. The Macaulay duration of the
portfolio is 1 Year to 4 years under anticipated adverse situation) is suitable for investors who are seeking*:
 Medium term savings
 A debt scheme that invests in debt and money market instruments with a view to maximize income
while maintaining optimum balance of yield, safety and liquidity
ICICI Prudential All Seasons Bond Fund (An open ended dynamic debt scheme investing across duration) is
suitable for investors who are seeking*:
 All duration savings
 A debt scheme that invests in debt and money market instruments with a view to maximize income
while maintaining optimum balance of yield, safety and liquidity
ICICI Prudential Ultra Short Term Fund(An open ended ultra-short term debt scheme investing in instruments
such that the Macaulay duration of the portfolio is between 3 months and 6 months) is suitable for investors
who are seeking*:
 Short term regular income
 An open ended ultra-short term debt scheme investing in a range of debt and money market
instruments
ICICI Prudential Floating Interest Fund (An open ended debt scheme predominantly investing in floating
rate instruments (including fixed rate instruments converted to floating rate exposures using swaps/derivatives)
is suitable for investors who are seeking*
 Short term savings
 An open ended debt scheme predominantly investing in floating rate instruments
ICICI Prudential Savings Fund (An open ended low duration debt scheme investing in instruments such that the
Macaulay duration of the portfolio is between 6 months and 12 months) is suitable for investors who are
seeking*
 Short term savings
 An open ended low duration debt scheme that aims to maximize income by investing in debt and
money market instruments while maintaining optimum balance of yield, safety and liquidity
ICICI Prudential Banking & PSU Debt Fund (An open ended debt scheme predominantly investing in Debt
instruments of banks, Public Sector Undertakings, Public Financial Institutions and Municipal Bonds.) is suitable
for investors who are seeking*
 Short term savings
 An open ended debt scheme predominantly investing in Debt instruments of banks, Public Sector
Undertakings, Public Financial Institutions and Municipal Bonds
ICICI Prudential Corporate Bond Fund (An open ended debt scheme predominantly investing in AA+ and above
rated corporate bonds.) is suitable for investors who are seeking*
 Short term savings
 An open ended debt scheme predominantly investing in highest rated corporate bonds.
ICICI Prudential Money Market Fund (An open ended debt scheme investing in money market instruments) is
suitable for investors who are seeking*
 Short term savings
 A money market scheme that seeks to provide reasonable returns, commensurate with low risk while
providing a high level of liquidity
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
Note: The Macaulay duration is the weighted average term to maturity of the cash flows from a bond. The weight of each cash flow is determined by
dividing the present value of the cash flow by the price.
RBI’s Monetary Easing 2.0