New Delhi: The Union Finance Minister Nirmala Sitharaman along with the industry experts on Friday largely welcomed the Reserve Bank of India's measures to increase private consumption and provide liquidity access to all sectors hit by the Covid-19 pandemic.
Finance Minister Nirmala Sitharaman said the RBI's decision to cut the benchmark lending rate will make loans affordable amid the COVID-19 crisis.
"The RBI decision, not just this one even earlier, has been very timely, well thought through and made a lot of difference then and I guess even now it will make a lot of difference to the sentiment which prevails and also immediately make affordable liquidity available," Sitharaman told DD News.
"The extension of the moratorium is something which all of us have waited for, and I only welcome the decision of the RBI like the last time. It is timely and purpose serving,"she added.
The steps announced by the Reserve Bank of India including reduction in repo rate and extension of moratorium on term loans for another three months will help in quick revival of the economy, State Bank of India chairman Rajnish Kumar said.
"The entire effort of the government and the RBI is to revive the growth in the economy and at the same time recognising the difficulties that industries are facing. All the measures around reduction in repo rate, moratorium and increase in the limit on group exposures will be helpful in revival of the economy," Kumar told reporters through a video call on Friday.
The measures are a calibrated response to the situation which is emerging on account to the disruptions caused due to COVID-19, he said.
"It is encouraging to note that acting in lockstep with the government, the RBI decided to cut repo rate by 40 basis points in order to provide the necessary impetus to growth which is expected to turn negative this fiscal," said CII Director General Chandrajit Banerjee.
"The RBI should be congratulated on the move to extend the loan moratorium by another three months," he said.
ASSOCHAM President Niranjan Hiranandani said reducing the repo rate by 40 basis points to 4 per cent will help the banks provide additional liquidity access to all the sectors.
"The industry welcomes extension of term loan moratorium till August 31. The lending institutions are being permitted to restore the margins for working capital to the origin level by March 31, 2021. This is a step in the right direction," he said.
Kumaresh Ramakrishnan, Chief Investment Officer at PGM India Mutual fund, said surplus liquidity, a dovish stance and weak growth conditions should pave the way for further rate easing in the months ahead, causing yields to rally.
Society of Indian Automobile Manufacturers (SIAM) President Rajan Wadhera said the 40-basis point reduction in repo rate, which takes the key policy rate to 4 per cent is a welcome step by the Reserve Bank of India (RBI) to support reduction in the cost of borrowing for traders and consumers and, hence, would positively impact consumer demand.
"We are hopeful that banks will pass on the benefit and support demand creation for discretionary products, like automobiles," he added.
Naveen Kulkarni, Chief Investment Officer of Axis Securities, said the rate cut will have limited impact in the short term but will be helpful to revive growth over the longer term.
"However, the decision to extend the moratorium period by another three months is a significant negative for the private banks both in the medium and long term. The impact on the banking sector will be negative," he said.
Mihir Vora, Director and Chief Investment Officer of Max Life Insurance, said the RBI's announcements will further ease the liquidity conditions and reduce funding costs for borrowers and lenders.
However, the credit risk-aversion in financial markets are likely to continue, the high-rated borrowers will continue to get easy funding and the lower-rated borrowers will continue to struggle to raise funds.
Rajat Rajgarhia, Managing Director and CEO for Institutional Equities at Motilal Oswal Financial Services, said India will need more measures on a continuous basis on both fiscal and monetary front to revive the economy from the current phase of negative growth.
Shishir Baijal, Chairman and Managing Director of Knight Frank India, said the expected contraction of the GDP is worrisome emanating from a significant drop in private consumption.
"While the RBI has taken steps to boost liquidity, one of the real challenges remains boosting of demand which we hope that subsequent announcements will address," he said.
Read more:Key takeaways from RBI Governor's press conference
Indian Texpreneurs Federation (ITF) also thanked the RBI for extending loan moratorium to six months which would help textile industries manage cash flow towards re-starting businesses during the post-COVID-19 times.
Conversion of deferred interest as a one-year term loan would also help the companies manage the liquidity and speed up the revival process because every rupee is important now to streamline post-COVID business operations, ITF convenor Prabhu Dhamodaran said in a statement here.
Real estate developers welcomed cut in key interest rates but said the RBI needs to take more steps, such as one-time debt restructuring of builders loan, to provide relief to the industry which has been hit badly by the lockdown.
The RBI needs to ensure that banks pass on the benefits to customers, they said. The industry hailed the extension in the moratorium on loan repayment but felt it was not enough.
"The advantages extended by the RBI through reducing the repo rates are not being passed on by the banks to the customers. The series of reduction in policy rates will help all sectors including real estate which is hit by the contraction in demand and liquidity squeeze caused by the COVID 19."
" However, we are hoping for quick transmission of these actions in banks' respective lending rates," CREDAI National Chairman Jaxay Shah said.
"We expected more stringent measures from the RBI to revive the economy. Real Estate sector can act as a catalyst in resurrecting the economy, backed by stringent fiscal and non-fiscal measures. The move of moratorium extension is a short term piecemeal solution to a long term problem," CREDAI President Satish Magar said in a statement.
Naredco President Niranjan Hiranandani said the reduction in repo rate and extension of moratorium period were steps in the right direction.
"Industry though awaits one-time debt restructuring as a holistic measure to give a breather to the industries across the board and help in its quick revival," he added.
Tata Realty and Infrastructure Managing Director (MD) and Chief Executive Officer (CEO) Sanjay Dutt said this will provide some financial relief to borrowers with their equated monthly instalments (EMIs) and make it cheaper to take new loans.
Among property consultants, Anarock Chairman Anuj Puri said the repo rate cut will further help banks to lower home loan interest rates, which may get several more fence-sitters onto the market.
JLL India Country Head Ramesh Nair said the faster transmission of these benefits to the end consumer in the form of lower home loan rates will aid in improving their effective affordability.
"However, one-time restructuring of loans is the need of the hour more importantly for the real estate sector which is severely ailing due to the pandemic," he added.
Dhruv Agarwala, Group CEO, Housing.com and Proptiger.com, said the move will boost sentiment and demand in the residential segment.
"What needs to be seen is how quickly the banks reflect this change in their respective rates," he said.
Knight Frank India CMD Shishir Baijal said it would have been a big respite if the long-standing real estate industry demand for a one - time restructuring of loans was allowed along with the measures announced on Friday.
(With agencies inputs)
