Reactions to RBI policy announcement

The central bank advanced its monetary policy committee meeting and voted for sizable reduction for policy rate.

In view of the COVID-19 pandemic, the Reserve Bank of India has reduced the repo rate by 75 bps to 4.4% on Friday.

The central bank advanced its monetary policy committee meeting and voted for sizable reduction for policy rate, RBI Governor Shaktikanta Das said in a press conference in Mumbai. “Four out of six members voted for 75 bps cut,” he added

Some of the reactions

“The RBI policy announcements are bold, decisive, compelling and with a humane touch in attenuating to the needs of the economy to fight through the pandemic. The large rate cut, the adjustment in capital conservation buffer, the moratorium on repayments and the bazooka of conventional CRR cut and unconventional liquidity measure of incentivising banks to support CP market all will help financial markets stabilise, lead to immediate rate transmission and address the credit needs of the real economy. The decision of allowing Indian Banks to participate in NDF market is a positive step in broadening the market participants and better rate discovery. Given that we are in exceptional times, RBI has played the role of championing the cause for the economy and financial system!” — Rajnish Kumar, Chairman, SBI

“The Monetary Policy Committee today announced a set of comprehensive measures to address liquidity, easing financial pressures on businesses and providing enough support to help the financial system battle the consequences of the COVID-19 pandemic.

Liquidity measures announced were to the tune of ₹3.74 lakh crore across three measures comprising Long Term Repo Operation (LTRO), CRR cut of 100 bps and the increase in marginal standing facility (MSF) to 3% of the Statutory Liquidity Ratio (SLR). That is a large amount of liquidity injection into the financial system that should help financial institutions and flow of funds to the real economy.” — Shanti Ekambaram, Group President — Consumer Banking, Kotak Mahindra Bank

“Given that the current lockdown is expected to have a negative impact on the cash flows of companies, the moratorium on repayments of term loans for a period of 3 months will help companies tide over this period. However, CII would urge that this period be extended further in case the impact of the virus outbreak lasts longer than expected. The RBI governor did well to provide the assurance that all instruments are on the table to protect the economy and the financial system from either an excessive downturn or volatility.” — Chandrajit Banerjee, Director General, CII

“Expectations from RBI were riding very high on rate cut, moratorium and liquidity measures. RBI has delivered on every count. This will provide significant support to the market and economy. The small finance banks will see significant liquidity free u, which is critical to tide through the current challenges. While the measures were much needed but the markets will move now on how the Covid curve behaves in India. Longer shut downs will be detrimental to economy and the markets. Earlier recovery from lock down will mean a V shaped market recovery.” — Naveen Kulkarni, Chief Investment Officer, Axis Securities Limited

“RBI has announced all best possible praiseworthy measures to support banks and all sectors of economy to overcome ongoing adverse impact of COVID 19. Huge liquidity infusion of 3.74 Cr, 100 bps CRR cut, long term Repo auction, 3 months moratorium on loan repayment and deep Repo cut of 75 bps. Huge interest reduction to all Retail and home loans linked with Repo. Coordinated efforts of Government and RBI will help Indian Economy to come out of these challenging times”. — Deo Shankar Tripathi, MD and CEO of Aadhar Housing Finance

“RBI has effectively thrown a lifeline with its 3-month EMI moratorium and working capital interest forbearance. The COVID-19 pandemic has impacted all systems globally, and broken MSME supply chains across most sectors in India. RBI Governor Shaktikantha Das has made the right move by addressing the nation right away given the unprecedented economic reality that we are experiencing today. As the COVID-19 situation unfolds, our hope is they will continue to ease the economic burden on MSMEs who are the backbone of the Indian economy.”— Hardika Shah, Founder & CEO, Kinara Capital

“Allowing all banks and NBFCs to offer a 3-month moratorium on repayments of all term loans to their borrowers is a positive step. However, this being an optional move, its implementation has been left to the lending institutions. The fact that no borrower’s credit history will get affected because of this provides relief to all categories of borrowers. This will also provide the companies some breathing space to re-draw their strategies and re-invent themselves.” — Hemant Kanoria, Chairman, Srei Infrastructure Finance Limited

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