New Delhi: A slew of measures announced by the RBI on Friday would help mitigate the impact of coronavirus-related lockdown on businesses, the industry said.
The industry said that the steps would help push lending rates down, encourage banks to infuse money into productive sectors, infuse liquidity and address the financial stress in the system.
The RBI on Friday allowed banks to put on hold EMI payments on all term loans for three months and cut interest rate by the steepest in more than 11 years as it joined the government efforts to rescue a slowing economy that has now got caught in coronavirus whirlwind.
The Reserve Bank of India (RBI) cut repo to 4.4 per cent, the lowest in at least 15 years. Also, it reduced the cash reserve ratio maintained by the banks for the first time in over seven years. CRR for all banks was cut by 100 basis points to release Rs 1.37 lakh crore across the banking system.
Read more:Timely relief! RBI permits delayed EMI, interest payment as India battles COVID-19 outbreak
The current situation in the economy and financial markets is extremely fragile and it required a massive dose of monetary stimulus to be injected at the earliest. The RBI has done just that. This should help lift the spirit of economy, " Ficci President Sangita Reddy said.
"This, together with a host of other measures to boost liquidity will address the financial stress in the system on account of the COVID-19 outbreak and the consequent lockdown. The substantial reduction in the CRR will help banks to reduce their lending rates and aid monetary transmission, " CII Director General Chandrajit Banerjee said.
Assocham President Niranjan Hiranandani said these measures, including reducing the cost of borrowing and reduction in the CRR would ensure India's financial stability at a time when there is heightened volatility in the global financial markets, with a desperate rush towards security.
Cyril Shroff, Managing Partner at Cyril Amarchand Mangaldas said: "The RBI has unleased a bazooka to deal with the economic pain and uncertainty prevailing in the wake of the COVID crisis. Acting swiftly and decisively, the RBI has used several levers to increase liquidity in the system".
PHD Chamber President D K Aggarwal said these measures will provide adequate liquidity in the system, bring down the cost of capital and mitigate the impact of pandemic COVID-19.
The reverse repo rate was cut by 90 bps to 4 per cent, creating an asymmetrical corridor.
RBI Governor Shaktikanta Das predicted a big global recession and said India will not be immune. It all depends how India responds to the situation, he said.
Global slowdown could make things difficult for India too, despite some help from falling crude prices, Das said, adding food prices may soften even further on record crop production.
Aggregate demand may weaken and ease core inflation further, he noted.
Slashed interest rate needs quick transmission: FM
Finance Minister Nirmala Sitharaman asked banks for "quick transmission" of slashed interest rate.
In a tweet, the Finance Minister also welcomed RBI Governor Shaktikanta Das' statement that the macro economic fundamentals of the Indian economy are sound, and in fact stronger than what they were in the aftermath of the global financial crisis of 2008-09.
"Appreciate @RBI @DasShaktikanta's reassuring words on financial stability," she said.
The three-month moratorium on payments of term loan instalments (EMI) and interest on working capital give much-desired relief, she added.
"...Slashed interest rate needs quick transmission," the Finance Minister said in another tweet.
Meanwhile, welcoming the RBI's decision to provide three months moratorium on payment of term loans, Commerce and Industry Minister Piyush Goyal said said that amid this hour of need, the "move has provided a much needed relief to people and businesses".
PM Modi welcomes RBI's decisions to safeguard economy from coronavirus impact
Prime Minister Narendra Modi lauded the decisions taken by the Reserve Bank of India to combat the economic slowdown triggered by the coronavirus lockdown and said that it will improve liquidity, reduce the cost of funds and help the middle class and businesses.
Taking to Twitter, Modi said that RBI has taken a giant step to safeguard the country's economy from the impact of coronavirus.
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Today @RBI has taken giant steps to safeguard our economy from the impact of the Coronavirus. The announcements will improve liquidity, reduce cost of funds, help middle class and businesses. https://t.co/pgYOUBQtNl
— Narendra Modi (@narendramodi) March 27, 2020 " class="align-text-top noRightClick twitterSection" data="
">Today @RBI has taken giant steps to safeguard our economy from the impact of the Coronavirus. The announcements will improve liquidity, reduce cost of funds, help middle class and businesses. https://t.co/pgYOUBQtNl
— Narendra Modi (@narendramodi) March 27, 2020Today @RBI has taken giant steps to safeguard our economy from the impact of the Coronavirus. The announcements will improve liquidity, reduce cost of funds, help middle class and businesses. https://t.co/pgYOUBQtNl
— Narendra Modi (@narendramodi) March 27, 2020
"Today, RBI has taken giant steps to safeguard our economy from the impact of the coronavirus. The announcements will improve liquidity, reduce the cost of funds, help middle class and businesses," Modi tweeted.
P Chidambaram terms RBI's moratorium on EMIs as 'ambiguous', 'half-hearted'
Former Union finance minister P Chidambaram called the Reserve Bank of India's (RBI) direction on the deferment of equated monthly instalments (EMIs) as "ambiguous" and "half-hearted". The senior Congress leader further called for the dates of the EMIs to be automatically deferred.
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I had suggested that all due dates falling before 30 June may be deferred to 30 June. Borrowers have been made dependent on the bank concerned and will be disappointed.
— P. Chidambaram (@PChidambaram_IN) March 27, 2020 " class="align-text-top noRightClick twitterSection" data="
">I had suggested that all due dates falling before 30 June may be deferred to 30 June. Borrowers have been made dependent on the bank concerned and will be disappointed.
— P. Chidambaram (@PChidambaram_IN) March 27, 2020I had suggested that all due dates falling before 30 June may be deferred to 30 June. Borrowers have been made dependent on the bank concerned and will be disappointed.
— P. Chidambaram (@PChidambaram_IN) March 27, 2020
Taking to Twitter, Chidambaram said, "I welcome the RBI's decision to cut the repo rate and measures to provide more liquidity. However, the RBI's direction on deferment of EMI dates is ambiguous and half-hearted. The demand is that all EMI due dates must be automatically deferred."
"I had suggested that all due dates falling before June 30 may be deferred till June 30. Borrowers have been made dependent on the bank concerned and will be disappointed," he said in another tweet.
(Inputs from agencies)
