Money & Banking

Bankers say RBI measures will improve financial stability, help borrowers

Mumbai | Updated on March 27, 2020

Bankers welcomed the Reserve Bank of India’s slew of measures to tackle the economic slowdown in the wake of the coronavirus pandemic, and said they would improve financial stability and help boost growth later in the year.

Noting the exceptional circumstances, Rajnish Kumar, Chairman, State Bank of India, and Chairman, Indian Banks’ Association, said the RBI has championed the cause for the economy and financial system.

“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 will help financial markets stabilise, lead to immediate rate transmission, and address the credit needs of the real economy,” he said.

Corporate customers

Zarin Daruwala, CEO, India, Standard Chartered Bank, said the steps would help the financial markets tide over the current situation. “The moratorium on loan EMIs, term loans and working capital facilities, is expected to provide relief to retail and corporate customers during these uncertain and challenging times,” she said.

CS Ghosh, Managing Director and CEO, Bandhan Bank, said the focus of the RBI is to raise liquidity in the system, which is also the need of the hour, while ensuring that the burden of repayments is eased for those who are most affected by the lockdown. “Such announcements were necessary to bring relief to many,” he said, adding that the declarations on CRR, TLTRO, NSF, among others, will help banks to work efficiently and keep the financial backbone of the country strong and steady in this time of crisis.

“Measures to ease financial pressures on businesses and individuals by way of a moratorium of three months on term loan repayments, interest on working capital facilities, and easing of working capital norms will bring big relief to small- and medium-sized companies and individual borrowers. The move will also help banks as these will not be classified as non performing assets,” said Shanti Ekambaram, Group President, Consumer Banking, Kotak Mahindra Bank.

In a surprise move, the RBI advanced the meeting of the Monetary Policy Committee from early April and announced a 75 basis point cut in the repo rate to 4.4 per cent. Analysts said the effective easing by banks could be higher.

“The repo rate was cut by 75 basis points. But the effective easing could be of a higher quantum, between 75 basis points and 115 basis points,” said Pranjul Bhandari, chief India economist at HSBC, adding that they expect growth to halt in the first half of FY21 but rise sharply in the second half as inventory restocking demand kicks in.

Published on March 27, 2020

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