Industry reactions to announcements made by RBI
It is believed that today’s announcements by RBI will greatly enhance liquidity and improve credit supply
Industry has given mixed reactions to the announcements made by RBI today (April 17, 2020). These reactions are as under:
“The Reserve Bank of India has further given a stimulus to the economy by announcing the second tranche of liquidity with a 25 basis point reverse repo cut taking it to 3.75 per cent from 4 per cent earlier and has also increased the WMA limit by 60 per cent to provide greater comfort to states in order to mitigate the financial distress.
With this move, the banks will now be able to lend more amid these current circumstances. A Target Long Term Repo Operations (TLTRO) of Rs 50,000 crore announced by the governor specifically targeting the NBFCs has come in the wake of downgrading of economic growth in the current fiscal.
The bold step taken by the Reserve Bank of India (RBI) to ensure smooth functioning of banks and financial institutions will help the country to prevent the economic slowdown curve from steepening. The announcement of excluding moratorium period from 90-day NPA period will prove to be a relaxation of asset classification norms. In view of tightening the financial conditions, the decision to provide special refinance facilities of Rs 50,000 cr to NHB, SIDBI and NABARD is commendable.
Overall, the RBI is committed to maintaining adequate liquidity in the banking system so that it can flow to corporates of small, medium and large size and this will bring relief to the cash flow problems amid COVID -19 crisis.”
-Avinash Bagdi, Head of Finance, Covestro India
“The steps undertaken by the Reserve Bank of India to ease the liquidity concern of Banks, NBFCs and other financial intermediaries is an acknowledgement of the liquidity issues faced by the financial system of the country as well as the industry.
Today’s announcement will give an initial fillip to the real estate sector. The Central Bank’s focus to provide credit flow to NBFCs is a key step. This will provide a boost to various real estate activities.
As per the latest data by RBI, NBFCs outstanding credit to the commercial real estate stood at INR 1,29,359 crore as of end September 2019. The relaxation of NPA classification norms and extension of one year for commencement of projects to real estate developers by NBFCs will provide the much needed relief to the sector.
The refinance facility to the extent of INR 10,000 crore to NHB is a welcome move to provide the much needed liquidity to Housing Finance Companies.”
-Ramesh Nair, CEO and Country Head, JLL India
“Facing an economic maelstrom, global economies have begun to deliver robust fiscal and monetary response to tackle the coronavirus outbreak. Nations across the world have come up with a mixture of rate cuts, liquidity boosting measures, tax incentives, loan guarantees, wage subsidies in order to shield their citizens as well as its enterprises from the devastating effects of the pandemic. India is adopting a calibrated approach to managing the covid induced slowdown in the economy. Today RBI announced the second tranche of liquidity boosting measures in an attempt to address the aftermath of the ongoing crisis . The much needed liquidity support to the struggling NBFC/HFC /MFI sector in the form of TLTRO 2 and refinancing through NABARD, NHB and SIDBI would aid to ease the incumbent funding and liquidity issues in the sector. The further deduction of reverse repo rate by 25 bps to 3.75% would push the lending by banks to productive channels of the economy. RBI stands ready to take further measures as and when required, which indeed provides further solace to markets and economy”.
-Jyoti Vaswani, CIO, Future Generali India Life Insurance Company Ltd
“Earlier on March 27, the RBI had reduced the repo rate to a 15-year low of 4.40 per cent by announcing a steep cut of 75 basis points. Now there has been reverse repo rate cut by 25 bps to 3.35%. We believe that this will minimise the epidemiological damage in the country due to coronavirus. Along with reduction in repo rate cut it has been announced that the NPA classifications will exclude the three-month moratorium period till May-end, which again is a welcome measure. Hopefully this will further give borrowers and lenders breathing space to stabilize from the unexpected financial and psychological jolt out of this pandemic. The announcement today is a step towards diminishing the coronavirus impact on the economy and ensuring the normal functioning of financial markets”.
- Siddhartha Mohanty, MD & CEO of LIC Housing Finance
“The tone of RBI is of empathy and support to needy sectors. The TLTRO focused on mid-size NBFCs and MFIs is positive. The 90 day extension in NPA reckoning for stressed standard assets as on 1 March effectively postpones NPA classification for accounts that were slipping to NPA between March and May. Given the optimism around economy coming back in phases and the support being extended through emergency COVID loans and other lines of credit, this will help all sectors , especially MSME and Retail. The 90 day deferment given for NCLT filing will help banks, if it can be taken as saving on 20% additional provision in these cases.”
- Padmaja Chunduru, MD& CEO, Indian Bank
“RBI’s recently announced liquidity measures are a clear step towards encouraging liquidity in the banking system, preserving financial stability and supporting overall economic growth.
In the wake of the evolving Covid-19 situation; the announcement in the reverse repo rate cut from 4 per cent to 3.75 percent should further push banks to lend to the productive sectors of the economy. In addition to this, RBI has also announced that loans given by NBFCs to real estate companies to get similar benefit as given by scheduled commercial banks. Announcement of refinancing facility for leading financial institutions such as NABARD and SIDBI, relaxation of stressed asset classification and resolution norms and provision of another window of Targeted Long Term Repo Operations worth INR 50,000 cr will provide additional fiscal stimulus to the economy. To further ease flow of funds to the housing sector, the National Housing Bank (NHB) has also been provided with a refinance facility of Rs. 10,000 Cr. for Housing Finance Companies (HFCs) as additional liquidity for individual housing loans, which is a much needed boost at this time.”
- Anshuman Magazine, Chairman & CEO - India, South East Asia, Middle East & Africa, CBRE
“The various measures announced by the RBI to maintain liquidity in the system and ease the flow of credit including reducing the reverse repo rate by 25 basis points will help ease some financial stress in the system. This move by the RBI will hopefully nudge banks to increase lending to various sectors of the economy, which is the need of the hour.”
-Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and PropTiger.com
“Measures announced by RBI today bode well for financial sector as well as other employment generating sectors like MSME, Agriculture etc. Infusion of Rs 50,000 crore in NBFCs also augurs well for the real estate sector as they have been the main source of funding in absence of bank finance in the last couple of years.”
-Mohit Goel, CEO, Omaxe Ltd
“Infusion of liquidity in the market is of utmost importance and the latest announcement will definitely help the economy. This time the RBI has addressed the realty sector too, which is a clear indication that the government understands the importance of the second largest employer in India. All the economic machinery has to work together to make sure the country comes out of this conundrum as soon as possible.”
-Pradeep Aggarwal, Founder & Chairman, Signature Global and Chairman, National Council on Affordable Housing, ASSOCHAM
“The second announcement by the RBI during the lockdown period is an indication that the government is working tirelessly to find out ways to address the situation. Real estate was demanding the steps that could help the sector and now it is again up to the banks to take a leaf out of RBI announcement where it has talked about the real estate sector and extend a helping hand to real estate.”
- Manoj Gaur, MD, Gaurs Group and Chairman, Affordable Housing Committee, CREDAI (National)
“The reduction in reverse repo rate by 25 basis points and infusion of Rs 50,000 crore in NBFCs as announced by apex bank is indeed a welcome move. The move is likely to prompt banks to lend more. Also, the relief on loans provided to commercial real estate by NBFCs, which are stalled for reasons beyond their control will help the sector immensely.”
- Deepak Kapoor, Director, Gulshan Homz
“I welcome the announcements made by the RBI Governor today. RBI has taken these measures as they realised that despite lowering of rates the banks were only lending to large corporates and not to mid size and small businesses or to real estate, hence RBI has provided liquidity to NBFC’s which mainly service the mid and small businesses and to the real estate sector. Real estate is a capital intensive business and needs liquidity infusion and we hope this and more steps from the RBI will prompt banks and NBFC’s to provide the required liquidity in the sector ".
- Uddhav Poddar, MD, Bhumika Group
“With Covid badly impacting the cash flow of all the sectors of the economy including real estate, most of the sectors will rely heavily on financial sector for survival. In such a scenario maintaining liquidity in the system becomes the key and today's RBI announcements are a step in the same direction. Hopefully, banks will also participate in the endeavour.”
- Raman Gupta, Director- Branding and Construction, GBP Group
“The reduction in reverse repo rate by 25 basis points and infusion of Rs 50,000 crore in NBFCs as announced by apex bank is indeed a welcome move. Also, the restructuring for upto 1 additional year of loans has also been allowed to the real estate projects which will definitely contribute towards easing the liquidity crunch as well. We await further steps to be announced by the RBI as mentioned by the Governor.”
-Prateek Mittal, Executive Director, Sushma Group:
“After the extension of the nationwide lockdown, some slowdown in the economy was inevitable. The Real estate sector will also not remain immune to the challenge & hence the industry was looking forward to concentrated efforts by the govt. In this regard, the industry welcomes the recent steps by the govt. to bolster liquidity, build credit capacity, & offer financial incentives.
As the govt. has pledged to refinance the NBFCs, roll out stimulus packages for NHB, NABARD, & SIDBI, etc. This will boost the liquidity in the market & also offer credit support to the realty sector. Also, the decision to allow NBFC to extend realty loans by a year under certain circumstances will give some relief to the sector. Interestingly, the inflation rates have declined and are expected to remain within 4% in the 1st half of 2020. This will offer ample policy maneuvering bandwidth to the central Bank & take more steps towards liquidity injection.”
- Ankit Kansal, MD&CEO 360 Realtors
“Liquidity, Recapitalisation & increased access to funds for MSME’s is the crux of the announcements made by the RBI Governor. The RBI’s decision to reduce the reverse repo rate further by 25 bps and reduction in LCR, will help bring liquidity in the market place with banks lending further. Crucially, the banks need to give up the cautious lending approach to ensure delivery of RBI measures on the ground. The refinance facilities of Rs.50,000 crores for NABARD & NHB, and mandatory 50% investment of TLTRO-2 to small, mid-sized NBFC’s will bring much needed capital for HFC’s & NBFCs, a move that was much required. The extension of realty loans by a year and NPA Classification relief for SMA accounts will go a long way in helping developers and MSME’s tide over the ongoing crisis.”
- Kaushal Agarwal, Chairman Director, The Guardians Real Estate Advisory
''In the wake of the Covid-19 crisis, the RBI’s announcement to reduce reverse repo rate by 25 basis points and additional liquidity for National Housing Bank will accelerate and facilitate bank credit flows towards the already stressed real estate sector. The allotment of Rs 10,000 crore to National Housing Bank will provide capital to HFCs and eventually provide major relief to developers battling liquidity issues in COVID-19 times. It is a welcome move and will offer liquidity to spice up the nationwide financial system. The banks should immediately transmit rate cuts to consumers and bring down home loan interest rates to 6%. This will help to push home buying and offset salary cuts that employees would be facing in the near future to prevent NPA. Also, additional measures such as one-year moratorium for commencement of business operations (DCCO) of project loans for real estate projects that are delayed for reasons beyond the control of promoters is a major relief and will provide much-needed aid to cash-starved builders.”
- Anuj Khetan, Director, Vijay Khetan Group
"I strongly support the measures announced by the RBI today to support the economy in this period. It is a sign of their continued efforts to stimulate economic activity and protect jobs. The LTRO for NBFCs and micro-lenders is a good tool to ease liquidity without tinkering with policy rates and Rs. 50,000 Crore is a substantial amount. This should, restore confidence especially among the MSME sector which provides a significant portion of the country’s jobs and is integral to all supply chains. That coupled with a cut in the reverse repo rate will incentivise banks to actively lend to those most in need of funds and make it affordable for businesses to borrow, address their working capital needs and get back into action as the country opens.”
– Venu Srinivasan, Chairman, TVS Motor Company.