Industry Welcomes RBI's Approach and Update For Economic Growth

Today, RBI monetary policy came with an element of satisfaction for industry experts.

Read here for Today's Monetary Policy Update 

Here are some experts expressing their views and observation on today's RBI announcements. Mr. Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital, commented to today's RBI's announcement by saying, “The opening of a special liquidity window of INR 15,000 crore till March 31, 2022, will act like a lifeline for affected hospitality and tourism sectors. It is appreciative of RBI to address the pandemic effects on multiple micro and small businesses like salons, car repair and rental services, who saw minuscule business. The measures announced would certainly assist in their revival process. Towards supporting the larger MSME ecosystem, RBI has decided to extend a special liquidity facility of ₹16,000 crores to SIDBI for on-lending/ refinancing through novel models and structures. The impact will be visible in ensuring sustained credit flow in the real economy. Further expanding the Resolution framework 2.0 from Rs. 25 crores to Rs. 50 crore will extend the credit coverage to a higher number of individuals and businesses. Considering the significant contribution of MSMEs to GDP, the relief measures will catalyze MSME recovery and further stimulate financial stability in the economy.”

Dr. Rajeev Singh, Director General, Indian Chamber of Commerce (ICC) appreciated RBI’s decision to step up its efforts to ensure liquidity in the system with another G-SAP worth Rs. 1.2 lakh crore planned for this fiscal year.

Mr Singh commented, "In addition to that, RBI has kept the repo rate unchanged at 4 per cent. Which, ICC feels shall further help home buyers. As prevailing low home loan rates are already enticing for homebuyers, with inflation set to be high and economic recovery slow due to the surge of Covid, residential real estate will continue to attract investment as it is a safe-haven asset."

"As an industry body, we highly appreciate Central Bank’s decision to increase the maximum aggregate exposure threshold under the resolution framework 2.0. As a result, individual and MSME borrowers’ loan (up to Rs 50 crore) can be able to opt for restructuring."

The Reserve Bank of India will also purchase the remaining Rs. 40,000 crore worth of government securities under the G-SAP 1.0 on June 17. In this, Rs. 10,000 crore would constitute the purchase of State Development Loans (SDLs). The inclusion of SDL on G-SAP would support state government borrowings from the market. Considering the increasing debt burden of the States, this policy measure will be really effective.

RBI said that it will open a special liquidity window of Rs. 15,000 crore till March 30, 2022, with tenors of up to 3 years at the repo rate. Under this banks can provide lending support to hotels, restaurants, travel firms, aviation ancillary services and other services that include private bus operators, car repair services, spa, and saloons. As an industry body, ICC highly appreciates this decision. It would go a long way in supporting cash strapped Hospitality industry.

"We also feel that the announcement of G-SAP 2.0 to the tune of Rs. 1.2 lakh crores will ensure adequate liquidity in the system. Upward revision of inflation rate will raise bond yields marginally in the short run."

Prithviraj Srinivas, Chief Economist, Axis Capital commented, “RBI kept policy rates unchanged as expected and predictably downgraded FY22 GDP growth by 1ppt to 9.5%.  The central bank continues to maintain a conservative stance on CPI (5.1% for FY22 vs. 4.9% 3 quarter average previously). To tackle likely pressures on domestic interest rates, the RBI highlighted the presence of USD 600bn FX reserves as a deterrent ahead of crucial FOMC meeting and gave predictable indications on RBI bond-buying program, G-SAP 2.0. In addition, there were other credit facilitation measures for severely impacted high contact services sectors. Overall today's measures and communication by RBI bolster current accommodative policy stance.”