RBI relaxes regulatory measures to transfuse liquidity, bring financial stability
Dr Niranjan Hiranandani – President – Assocham and NAREDCO
MUMBAI/ NEW DELHI 17 APRIL 2020: The perception that authorities had focused only on saving lives and not livelihood was dispelled today, with the RBI Governor’s announcements which focus on enhancing liquidity as also specific measures to deal with the extraordinary set of circumstances arising out of the COVID-19 crisis.
“From the perspective of regulatory norms to spur an economic revival, the measures announced aim to maintain adequate liquidity in the system, facilitate bank credit flow and ease financial stress. These are absolutely welcome, given that economic activity has come to a standstill during the lockdown,” said Dr. Niranjan Hiranandani.
For real estate, the announcement that loans given by NBFCs to real estate companies would get similar benefits as given by the scheduled commercial banks was ‘positive’, said Dr. Niranjan Hiranandani. “The RBI had earlier permitted extension by one year without asset classification downgrade, if DCCO was delayed for reasons beyond control of promoters. This relief is now also allowed for NBFCs; loans by NBFCs to commercial real estate will get the same relief. This move will positively impact NBFCs and real estate,” said Dr. Niranjan Hiranandani.
He welcomed the reverse repo rate being revised from 4 per cent to 3.75 per cent, saying it would enhance liquidity in the choked economy. This encourages Banks to deploy funding to the sectors in need. On similar lines, the announcement on the 90-day NPA norm not to apply on the moratorium granted on existing loans by banks; the LCR requirement of banks having been brought down to 80 per cent from 100 per cent as also banks not to make any further dividend pay-outs in view of the financial difficulties arising from the Covid-19 crisis were instrumental step in right directions to salvage economic meltdown.
India Inc. particularly appreciates the RBI Governor’s statement that the RBI is monitoring the situation that is developing due to the Covid-19 outbreak and will use all its tools to deal with the pandemic fallout. The liquidity management measures include the second LTRO, which is worth atleast `50,000 crore, what was welcome was the announcement that atleast 50 per cent of this must go-to mid and small-sized NBFCs and MFIs. The Rs. 50,000 crore special refinance facilities to NHB, SIDBI and NABARD would also play a constructive role, he added.
“The positive GDP growth forecast by IMF for India at 7.4% post Covid crisis is silver lining amidst dark terrain. Today’s overarching financial instrumental steps announced by RBI assured the constant monitoring of the daunting Human- Economic crisis. Today’s targeted liquidity transfusion measures aimed to improve the yield curve and incentivize banks to deploy more funding to the industry seems to be a kick-start step towards financial resilience” he concluded.