RBI’s measures to mitigate Covid 19 risk should help lift spirit of economy: FICCI

  • Industry News
  • Mar 28,20
Decision to put a temporary stop on payment of term loans and interest rates on working capital loans will provide relief to the companies, says Dr Sangita Reddy, President, FICCI
RBI’s measures to mitigate Covid 19 risk should help lift spirit of economy: FICCI

Decision to put a temporary stop on payment of term loans and interest rates on working capital loans will provide relief to the companies, says Dr Sangita Reddy, President, FICCI

New Delhi

Welcoming RBI’s measures to mitigate risk arising from novel coronavirus (Covid 19) impact, Dr Sangita Reddy, President, FICCI, commented, "This has been a very comprehensive set of announcements made by RBI and highlights action in all the key areas that were expected. 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 spirit of economy."

In the wake of the coronavirus pandemic, RBI on March 27 cut the repo rate by 75 basis points to 4.40 percent. "The sizable reduction in the repo rate by 75 basis points coupled with a reduction in the reverse repo rate by 90 basis points should enable lowering of lending rates as well as encourage banks to move money into the productive sectors of the economy through on-lending and not look at parking money with the RBI," Dr Sangita Reddy said.

She added, "Of course, what was even more critical at this juncture was the need to infuse a large amount of liquidity in the market and by announcing targeted long term repo operations, reducing the cash reserve ratio by 100 basis points and permitting banks to draw a larger amount under the marginal standing facility window of the RBI, the central bank has ensured that the dislocations in the financial markets get addressed to a great extent. A massive liquidity, 3.2 percent of GDP has been added through these measures.”

According to her, companies today need liquidity for survival. “If the money released into the system reaches the corporates through greater lending, investments in commercial paper, non-convertible debentures and corporate bonds, we will be able to see through this difficult phase whose different facets are still getting uncovered. The decision of the RBI to allow banks to hold their investments in these corporate instruments till maturity should provide a lot of comfort to banks as the current market conditions are quite volatile,” said Dr Reddy. 

Besides a deep cut in the lending rate and providing liquidity support, the RBI has also offered succour by way of allowing a moratorium on payment of instalments of term loans and deferring payment of interest rates on working capital loans for a period of 3 months. None of these measures would call of asset reclassification at the end of financial institutions and would also have no bearing on the default credit history of the borrowers.

FICCI President added, "The decision to put a temporary stop on payment of term loans and interest rates on working capital loans will provide relief to the companies as their cash flows have been completely disrupted. We hope that RBI will do a continuous review of the situation as it evolves and will revisit the announcements for any further extension and relaxations that may be required in this period of uncertainty. We look forward to all relaxations being transmitted by banks in full and without delay.”

 

Related Stories

Electrical & Electronics
Suzlon Energy secures 100.8 MW wind project

Suzlon Energy secures 100.8 MW wind project

Suzlon's responsibilities encompass the entire project lifecycle, including supply, supervision, commissioning, and post-commissioning operation and maintenance services.

Read more
Other Industrial Products
India’s GDP rises by 7.6% in Q2 FY24, manufacturing, construction led the growth

India’s GDP rises by 7.6% in Q2 FY24, manufacturing, construction led the growth

The growth was much higher than expected, mainly driven by investments and government consumption. However, private consumption growth was muted due to weak rural demand and some moderation in urban..

Read more
Policy Regulation
PLI scheme: Need for a course correction

PLI scheme: Need for a course correction

The Government of India is reportedly planning to ease some norms for five sectors (textiles, pharmaceuticals, drones, solar and food processing) to help them better utlise the fund under its Produc..

Read more

Related Products

Heavy Industrial Ovens

INDUSTRIAL SUPPLIES

Hansa Enterprises offers a wide range of heavy industrial ovens.


Read more

Request a Quote

High Quality Industrial Ovens

INDUSTRIAL SUPPLIES

Hansa Enterprises offers a wide range of high quality industrial ovens. Read more

Request a Quote

Hydro Extractor

INDUSTRIAL SUPPLIES

Guruson International offers a wide range of cone hydro extractor. Read more

Request a Quote

Hi There!

Now get regular updates from IPF Magazine on WhatsApp!

Click on link below, message us with a simple hi, and SAVE our number

You will have subscribed to our Industrial News on Whatsapp! Enjoy

+91 84228 74016

Reach out to us

Call us at +91 8108603000 or

Schedule a Call Back