COVID-19 update: RBI announce measures to combat pandemic

The Reserve Bank of India (RBI), through a press conference, announced long-term repos worth Rs 50,000 crore yesterday for non-bank financiers, and micro finance institutions to level-up their liquidity amidst COVID-19 pandemic outbreak.

RBI

On this development, experts from around the sector shared their views with The Banking & Finance Post.

What experts think about RBI’s move?

Meghna Suryakumar, Founder and CEO, Crediwatch

While there was a muted cheer from the last two announcements from the RBI and Finance Ministry, there was an expectation of further liquidity measures being brought in by the Central Bank post the extension of the lockdown on 14th April. The Reverse Repo cut to 3.75% is expected to retain some liquidity at Indian Banks helping in credit offtake when the situation improves. The special package to NABARD, SIDBI and NHB is further expected to infuse liquidity to small agriculture-driven businesses and low income housing. Since the NBFCs were left out in the previous announcement from the announced benefits, today’s announcement of treating their role as SCBs is a positive signal – NBFCs play a vital role in addressing credit disbursement in smaller cities and new-to-banking segment and we expect this to help them in improving their balance sheet. The NPA classification methodology of excluding the 3-month moratorium period till end May, is also going to ease the pressure on banks in the current quarter.

While Crediwatch analysis on COVID impact shows that FY21 is expected to see a strain on the supply chain in the Indian economy, different sectors are expected to witness different levels of impact and recovery trajectory post the lockdown. Essential services, utilities and sectors benefiting from lower oil prices may recover faster but auto, tourism and logistics may see a longer recovery cycle. We expect the RBI and Central Government to maintain a close eye on sectoral developments as the lockdown eases.

Ankit Agarwal, Managing Director at Alankit Ltd

The much needed liquidity for easing NBFC financing would help in shorter time frame. Reduction in reverse repo rate will disincentive the banks from holding the funds and would be encouraged to lend more to the borrowers and will give relief in these cash stricken situations during covid 19 lockdown.

Ashok Mohanani, Chairman, EKTA World and Vice President, NAREDCO, Maharashtra

Today’s announcement focused more on bank relief and commercial real estate, there was no mention of residential real estate. Certain announcements by RBI Governor on the liquidity front will benefit in churning the economic cycle. A rate cut of 25 basis points to 3.75 percent from 4 percent is in favor in terms of RBI from banks. There is indeed a requirement of more clarity and focused announcements towards credit growth.  The flexibility provided to NBFC  on the DCCO by extension of one year is expected to provide relief to the borrowers in short-run for NBFC and the real estate sector. There is a need for focus on residential real estate and hope for some relief measure to be announced.

P. Nandakumar, MD & CEO of Manappuram Finance Limited

The RBI Governor’s announcement of an TLTRO 2.0 of Rs. 50,000 crore to be deployed in investment grade NBFCs besides Rs 15,000 crore to SIDBI for on-lending or refinancing is a welcome step. Of course, going forward, the size may have to be increased significantly. Earlier, the announcement by the Ministry of Home Affairs allowing NBFCs to restart their operations is a major positive development.

Kunal Varma, CBO and Co-Founder, MoneyTap.

The latest TLTRO announcement from RBI aimed at injecting around Rs. 50,000 Cr of additional liquidity into the banking system, specifically via Banks to small and mid-sized NBFCs and MFIs, is a well-timed move. This will increase the availability of credit to end borrowers, hopefully at lower or more competitive interest rates. It came at a much needed time when NBFCs were suffering from a significant business impact and liquidity stress due to the COVID-19 pandemic.

Motilal Oswal, MD and CEO of Motilal Oswal Financial Services 

Given the unprecedented times we are in, it is heartening that RBI is addressing all these challenges at a war footing. We believe, the key measures announced by RBI will help inject the much needed liquidity in the system, facilitate and incentivise credit flow and provide flexibility on regulatory forbearance. Markets are in buying zone. Keep accumulating and increasing equity allocations gradually.

Gyanesh Chaudhary, MD- Vikram Solar

I would like to congratulate Directorate General of Foreign Trade (DGFT) for extending the MEIS export incentives till 31st December 2020. It will provide exporters a much needed breathing space as domestic sales will remain relatively low due to the pandemic faced by India. As we pass this pandemic, global supply chains are bound to re-align and India will have a good opportunity to promote its exports. DGFT is still in the process of finalizing the RoDTEP export incentives, and we would recommend that export incentive under RoDTEP should be increased substantially to boost Indian exports.

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