Describing the new RBI measures as a life-saving dose for millions of businesses, ASSOCHAM said along with government’s partial re-opening plan from the lockdown, further regulatory forbearances, infusion of additional liquidity and nudging banks to do real lending would provide a much-needed shield both to Corporate India as also the most vulnerable informal sectors of the economy from the Covid-19 pandemic onslaught.
“The Whatever-It-Takes approach of the RBI to face the challenge of the health crisis that is projected to shave USD 9 trillion off the global economy in two years, reflects courage and responsibility on the part of the Reserve Bank of India. Governor Mr Shaktikanta Das is clearly on top of the situation, navigating it in the high seas of fast evolving challenges, resulting from the unprecedented health crisis,” said ASSOCHAM Secretary General Mr Deepak Sood.
Mr Sood said there are several relief measures unveiled by the RBI which should help the NBFCs, Housing Finance Companies, small businesses and above all considerably avert the risk of further NPAs. “The fact that the NPA re-classification norms giving more time to the stressed loans to remain ‘standard’ are accompanied by the need for higher provisioning by banks shows the prudence path followed by the RBI. Higher provisioning would provide a long-term stability and higher protection to the banks. After all, the banks are front-line warriors of the businesses as doctors and health workers are to the human beings.”
The ‘Asset Standstill,’ till May 31, 2020 for all standard accounts which were granted moratorium or deferment as on March 1, 2020 would be big relief to the borrowers as also banks.
By reducing the Reverse Repo further to 3.75 per cent from 4.0 per cent, the RBI is keen on productive deployment of huge funds parked with itself by the banks. As much as Rs 6.90 lakh crore is parked under this window as on April 15 and the RBI wants banks to use this in investments and loans in the productive sectors of the economy. “This is a clear incentive as also nudging to the banks to leave their over-cautious approach and deploy money in the productive system,” the ASSOCHAM Secretary General said in a statement.
It said the additional liquidity of Rs 1 lakh crore for the NBFCs, SMEs, HFCs and micro finance institutions should provide relief to the key sectors of the economy; whether this would need further infusion depends on how the situation unfolds in the coming weeks.
The regulatory forbearances to commercial real estate projects should also help, although the emerging scenario would also depend on how the partial re-opening of lockdown after April 20 pans out. “One hopes, the pandemic has peaked and should fast recede as the Centre and the states are waging battles in the most coordinated manner with the cooperation of other stakeholders of society and people’s participation”.
The ASSOCHAM also draws comfort from the forwarding looking statement of the RBI Governor, expressing hope for downward inflation trajectory.