FICCI welcomes RBI steps, looks forward to more such measures

Apr 17, 2020

NEW DELHI, 17 April 2020: Commenting on the announcements made by Mr Shaktikanta Das, Governor, RBI earlier today, Dr Sangita Reddy, President, FICCI said, "This is another major step ahead taken by the central bank in countering the negative impact of covid-19 on the economy. The economy and industry need a heavy dose of liquidity infusion and the financial intermediaries need the confidence that the steps they take to support industry in this hour of crisis will be viewed leniently and not attract regulatory actions in terms of asset reclassification and attended provisioning. Today's announcements show the RBI moving the ball in both these areas and FICCI is encouraged by this stance. The requirements of the economy, of course, are much larger and we look forward to RBI coming out with more such measures in due course."

 

"Through the FICCI NBFC Committee, we had requested the RBI for a specific allocation of funds under the TLTRO operations exclusively for the NBFCs. We are glad that RBI has announced that liquidity to the tune of Rs 50,000 crore will be made available to NBFCs and MFIs and that banks availing funds under this window will be required to make investment in financial instruments issued by NBFCs within a month of availing such funds. Additionally, the special refinancing line offered to NABARD, SIDBI and NHB to the tune of Rs 50,000 crore should further add to the flow of funds to NBFCs, MFIs and SMEs," Dr Reddy added. 

 

The reduction in the reverse repo rate further from 4 per cent to 3.75 per cent should disincentivize banks from going in for risk free parking of funds and instead look at channelling funds to the productive sectors of the economy. We feel the RBI could have reduced the reverse repo rate by a larger quantum as the need today is to have liquidity flow into the system. 

 

"Another major announcement by the RBI relates to the asset classification standstill. This was a key ask of FICCI and we are happy to note that with this announcement all accounts that had not slipped into the NPA category before March 2020 will continue to be treated as standard accounts during the period March to May 2020. With NBFCs too being allowed to avail of this regulatory forbearance, we can expect banks and other financial institutions to come forward and offer loan moratorium with greater confidence to companies as asset reclassification is a major impediment for financial institutions while considering moratorium or restructuring," said Dr Reddy. 

 

With regard to the real estate sector, the relaxation offered to banks, to allow extension of 1 year in the date of commencement of commercial operations for commercial real estate projects without the need for any restructuring should provide some more relief to this sector which has been under duress for long. We compliment the RBI for allowing NBFC sector to also offer a similar treatment for loans extended for commercial real estate project.