The RBI's move to slash reverse repo rate and provide a re-finance window of Rs 50,000 crore will infuse liquidity into the system and nudge banks to lend more, enabling businesses to overcome the financial stress caused by the coronavirus pandemic, India Inc said on Friday.
CII Director General Chandrajit Banerjee saidthe RBI's continued resolve to ensure that the availability of liquidity, especially for the stressed sectors, remains adequate is commendable.
FICCI President Sangita Reddy said relaxation in regulatory requirements further will help banks in dealing with the COVID impact. Ficci would request RBI that additional working capital should be mandated rather than depending on the discretion of the banks.
Thomas Muthoot, Founder-Director, Muthoot Pappachan Group said:"Specific measures announced in terms of directing banks to invest 50 per cent of funds under TLTRO 2.0 in mid-sized NBFCs through NCDs, etc., refinancing of all-India financial institutions like SIDBI and NHB and also reduction in reverse repo rate, would help substantially in liquidity for us to lend a lot more to the common man, who are terribly impacted by the current crises."
Describing the new RBI measures as a "life-saving dose" for millions of businesses, Assocham said the partial re-opening of 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 against the Covid-19 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 RBI. Governor 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, " Assocham Secretary General Deepak Sood said.
He said the relief measures unveiled by the RBI should help NBFCs, housing finance companies, small businesses and above all considerably avert the risk of further NPAs.
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TheReserve Bank of India on Friday cut the reverse repo rate and announced a slew of measures including re-finance window of Rs 50,000 crore and targetted long term repo auction of similar amount to deal with the impact of the Covid-19 pandemic.
In a video message, Das said in order to encourage banks to deploy the surplus funds in investments and loans in productive sectors of the economy, it has been decided to reduce the fixed rate reverse repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 4 per cent to 3.75 per cent with immediate effect.
The reverse repo rate is the rate banks earn by parking deposits with the RBI.
Surplus liquidity in the banking system has risen significantly in the wake of government spending and the various liquidity enhancing measures undertaken by the RBI, he noted.
He also said it has been decided to conduct targeted long-term repo operations (TLTRO 2.0) for an aggregate amount of Rs 50,000 crore, to begin with, in tranches of appropriate sizes.
Among other measures, Das also announced special refinance facilities for a total amount of Rs 50,000 crore to Nabard, Sidbi and National Housing Bank (NHB) to enable them to meet sectoral credit needs.
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