Pune: The RBI Governor announced a new set of measures on Friday in response to the current growth and financial market stress. These measures are mostly aimed at easing some pressures on the lower-rated / smaller participants of the financial markets.
Industry experts on Friday hailed the RBI’s decision to boost liquidity into the system. The experts said the move by RBI will help them in battling the crisis caused by the lockdown to control COVID-19.
Reacting to the RBI’s move, Capri Global Capital Ltd MD Rajesh Sharma said the RBI’s announcement was a “timely measure with an aim to provide strong support to the NBFC sector.”
The announcement to conduct additional TLTRO amounting to Rs 50,000 crore, of which at least 50 pc is to be specifically invested in NCD, CP and bonds of small and mid-sized NBFCS and MFI, will address the demand for additional liquidity by financial institutions besides banks. The special refinance facilities of Rs 50,000 crore to NHB (Rs 10,000 crore for refinancing housing companies), SIDBI (Rs 15,000 crore for MSME loans) and NABARD (Rs 25,000 crore) will help meet credit need of the MSME sector and housing finance, which has been severely affected by COVID-19, added Sharma.
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Another expert JLL India CEO and country head Ramesh Nair said the steps undertaken by the RBI to ease the liquidity concerns 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.
The move 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, he added.
Sharing his views, CBRE India, South East Asia, Middle East & Africa Chairman and CEO Anshuman Magazine said the move by RBI is 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 per cent 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 a similar benefit as provided 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 Rs 50,000 cr will provide additional fiscal stimulus to the economy.
To further ease the 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, added Magazine.
Speaking on the RBI move, Max Life Insurance Director & Chief Investment Officer Mihir Vora said the RBI announcements are very essential to support the weakest segments of the economy. RBI has been proactive in addressing the pain in areas which were not getting the full benefit of the earlier measures. Widening of the LAF corridor by reducing the Reverse Repo rate further disincentives banks to park money with the RBI and encourage lending.
TLTRO to be used for 50 pc large and 50 pc smaller NBFCs will help the NBFC sector, which is under increasing stress of NPAs and liquidity, added Vora.
EarlySalary Co-Founder and CEO Akshay Mehrotra said, “The move by RBI is a welcome move. As a FinTech lender and Small NBFC, we need much more support to emerging stronger in these times. We are hoping that SIDBI and PSU banks funds will trickle down to smaller NBFC funds like us. Adding to this NPA classification to exclude the moratorium period and relaxed NPA classification will help both lenders and borrowers.
Similarly, much needed support to Reality Focused NBFC with a one-year extension for projects delayed will assist. Unfortunately, suspense remains around moratorium to NBFC. Lastly additional Repo rate cut and infusing 50KCr via TLTRO will help medium and Small NBFCs.”
(With agency inputs)