Expert hail RBI's liquidity-boosting measures for NBFCs, easing of bad-loan rules; say reverse repo rate cut shall push banks to open up credit flow
The RBI has further given a stimulus to the economy by announcing the second tranche of liquidity with a 25 basis point reverse repo cut taking it to 3.75 percent from 4 percent earlie
The Reserve Bank of India (RBI) has announced a slew of liquidity-boosting measures for NBFCs and other segments including further easing of bad-loan rules, freezing dividend payment by lenders and pushing banks to lend more by cutting the reverse repo rate by 25 basis points, which has helped in lifting sentiments amid the COVID-19 gloom.
Sectoral heads and industry experts weigh in with their views:
Rajeev Singh, Director General, Indian Chamber of Commerce
The Indian Chamber of Commerce welcomes RBI’s 25 bps reverse repo cut announcement making it at 3.75 percent while the repo rate remains at 4.4 percent, further increasing the symmetry between the two and nudging more and more banks to increase lending and investment. ICC highly appreciates the new lifeline to NBFCs by way of a TLTRO (Targeted Long Term Repo Operations) of Rs 50,000 crore, which would help them to lend to the micro segments of each sector in the economy. Refinance Facility of Rs 50,000 crore have also been provided to NABARD, SIDBI & NHB to help them to on lend to agriculture, MSME & real estate sector. It is indeed a great step that request for relaxation of NPA norms have been acceded to NPA norms of 90 days have excluded the 90-day moratorium period, making it 180 days in effect and saving lot of companies’ from being drawn into the vortex of insolvency. Also, it is a welcome step that the different states have been permitted to borrow more to fight the COVID-19 pandemic under the Ways and Means Advances from RBI to states.
DK Srivastava, Economist and Chief Policy Advisor, EY India
Among numerous liquidity enhancing and regulatory measures announced by the RBI, two measures are of critical importance: Reduction in the reverse repo rate by 25 basis points and, increase in the state governments’ WMA limits by 60 percent of the original limit. Both these measures would facilitate increase in economic activities as the lockdown is progressively eased. State governments would start making pending payments and banks and NBFCs would activate their lending programme more aggressively.
Arun Singh, Chief Economist, Dun and Bradstreet
The RBI has announced several unconventional measures to support the financial needs of the economy and easing the regulations to support the banks, in line with many central banks across the world. While there were no big-bang announcements, the various measures taken by the RBI would provide some relief to both banks and consumers. Unconventional measures such easing of liquidity coverage ratio from 100 percent to 80 percent, reducing the reverse repo rate by 25 basis points, easing of asset classification period, additional regulatory measures to mitigate the burden of debt servicing and increasing the borrowing limit of states from RBI as they struggle to raise funds through GST revenue and limited access to global sources was much needed.
Infusion of Rs 500 bn liquidity through TLTRO 2.0 for NBFCs, besides some provisions would address the liquidity needs of the NBFCs. However, since these funds would be directed through banks who are likely to impose margins, the cost of borrowings will remain high for NBFCs. Even as the surplus liquidity in the system has increased after the RBI injected liquidity to the tune of 3.5 percent of GDP last time, banks should disburse funds generously. The lowering of fixed repo rate by a 25 basis points should encourage banks. However, there is uncertainty and apprehension regarding the risk premium to be considered by banks while deploying funds to various sectors whose period of recovery would vary depending on the level of impact.
Rajnish Kumar, Chairman, SBI and Chairman, IBA
The second round of announcements by RBI bears testimony and rightful recognition to the evolving market conditions. The RBI has unveiled TLTRO 2.0 through defined incentivisation for banks that will clearly allow NBFCs and MFIs the benefit of such largesse. It has also provided refinancing support at repo rate to NABARD, SIDBI and NHB that will facilitate resource flow to other deserving entities. Providing relaxation to banks by allowing 90-day asset classification standstill for accounts covered under moratorium will imbibe banks with the desired operational flexibility to lend a helping hand to stressed accounts. The decision to allow banks to conserve capital by restraining them from dividend payouts will allow banks to retain their capacity in supporting the economy. Extension of the DCCO guidelines to NBFCs in terms of their lending to commercial real estate will help the former in this challenging environment. Overall the second set of packages by RBI is an excellent reflection of combining the policy response and regulatory responses in the most optimal manner.
Radhika Rao, Economist, DBS Bank India
The RBI's measures are a follow-up to earlier efforts and fill gaps as seen necessary. The key change was the swift move to provide financing relief to NBFC/ MFIs across categories through a fresh tranche of TLTRO 2.0. Add to this, the reduction in the reverse repo rate is meant to prod banks to consider lending activity rather than park funds with the central bank. Given the still sizeable funds that is being parked with the central bank under the reverse repo operations even after the 90bps cut in March, points to the limited credit and risk appetite of financial institutions. At the margin, a further reduction might disincentivise banks to utilise the reverse repo window. Increase in the Ways and Means Advances limit should provide a short-term relief to the state governments, by extension calming states’ yields and as a second derivative to cap markets’ borrowing costs.
The market participants continue to harbour expectations of directed support for government securities, especially via open market operations and as a final recourse via the primary auction, if necessary. The central bank is likely awaiting clarity on further fiscal stimulus and the consequent increase in borrowings required to finance the higher deficit, before gauging the need and scale of bond purchases. On rates, we maintain our call for another 50bps cut this quarter on heightened growth risks, while inflation is expected to trend back towards the 4 percent target by mid-FY.
Rajni Thakur, Economist, RBL Bank
The RBI's relief measures is a clear signal that policy makers are constantly evaluating economic developments in face of the viral outbreak and stand ready to support. Among the measures announced, TLTROs worth 50,000 crore for NBFCs will have an immediate impact in terms of easing liquidity issues for NBFCs sector and also nudging consumption levels when economic activities resume. Refinance facilities for institutional lenders like NABARD, SIDBI and NHB at Repo rate not only provide backstop support to the most impacted sectors biz, Small Scale Enterprises, MFIs etc but also balance prudence and stimulus at the same time.
Zarin Daruwala, CEO, India, Standard Chartered Bank
Within a month, the RBI has delivered a second booster shot to the economy. The decisive measures have sent out a clear pro-growth message. The easing up of liquidity coverage ratio (LCR) to 80% till September end and the NPA relief during the moratorium period, will improve appetite for credit delivery. The targeted long term repo operations (TLTRO) for the NBFC sector should also help address their liquidity pressures. Ample system liquidity along with the widening of the interest rate corridor to 65bps, should continue to aid monetary transmission.
RK Gurumurthy, Head–Treasury, Lakshmi Vilas Bank
Continuing from where it left, the v.2 of additional monetary support from RBI to address the COVID-19 economic collapse, came with a specific objective of channelizing liquidity to credit oriented schemes. RBI has assured continuation with super-easy liquidity and softer rates policy to ease financial stress. The reverse repo rate has been cut by 25 basis so that the corridor now becomes 90 basis. The system has roughly 7 trillion of excess liquidity that are parked at RBI's reverse repo window. The RBI announced cut is a disincentive to overnight investments and should find way into credit. Additional TLTRO of 50,000 cr has been announced and is likely to continue. LCR requirement has been lowered to 80 percent until October 2020-thereby releasing the pressure for banks to divert a larger part of their investments in HQLA.
Measures towards further relaxing NPA recognition norms and additional refinance facility to NABARD etc will help in deferring NPA recognition and also help rate transmission better. In recent times, yields on GSecs have hardened leading to sharp increase in the borrowing costs of several state governments. The spread over overnight repo is close to historic highs and therefore warranted strong action. The relaxation in WMA guidelines would go some distance towards addressing this.
Rajosik Banerjee, Partner and Head-Financial Risk Management, KPMG in India
TLTRO 2.0 to pump in additional Rs 50,000 crore, which was much needed liquidity for NBFC and MFIs across and large and mid-sized firms. This should result in more transmission of funding to the corporate sectors. Additionally, all standard assets as on 1 March, 2020 shall exclude the moratorium period for NPA classification. Hence, there would be a standstill of all such accounts from 3 months period, which was a much needed clarification that was awaited. The market should consider this favorably at this will ease liquidity and credit classifications issues.
Naveen Kulkarni, Chief Investment Officer, Axis Securities
The RBI continues to be very proactive to ensure financial stability on the system. The continued measures to boost system liquidity and help manage system stress are positive. Some of the liquidity and asset classification measures should help the large housing finance companies, as they have large diversified books. However, the systemic challenges continue to be quite significant as there is both demand and supply destruction in the economy which have significant balance sheet impact on the BFSI firms. So, with time, more reforms, guidelines and measures can be expected from RBI as the extent of systemic challenges become more visible.
Rajiv Agarwal, MD-CEO, Essar Ports
The measures announced by RBI are the much-needed stimulus at a time when the economy needs some stringent regulator norms to induce a revival. The decision to provide special finance facility of Rs 50,000 cr to financial institutions is a smart move to maintain liquidity in the banking sector. This should result in more funds being available for the corporate sectors. The move will provide relief to the lenders especially during the economic and financial disruptions arising due to COVID 19. The cut of reverse repo rate by 25 basis points will also give a required push to the banks to open up the credit flow to keep economic activities moving smoothly.
Sai Venkateshwaran, Partner and Head–CFO Advisory, KPMG in India
The measures announced by the RBI, in particular the TLTRO 2.0 for a total of Rs 50,000 crores, will provide some of the much needed liquidity for NBFCs, that have been faced with a significant ALM mismatch as they haven’t benefited from the grant of moratorium announced by RBI earlier. While the large corporates had benefited from the first phase of TLTRO, RBI has ensured that the small and mid-sized NBFCs also stand to benefit from TLTRO 2.0. Apart from providing additional liquidity, the RBI announcement on asset classification standstill should help in easing loss provisioning for non-performing loans. In particular, NBFCs that are now required to report under Ind AS, will have to take this into account while performing their expected credit loss calculations, together with the positive effect of all other governmental support measures targeted directly at the borrowers, whether, retail or corporate. This will remain an area of key judgement for NBFCs and will have a direct impact both on their earnings as well as their lending ability.
Ashish Jain, Partner, Cyril Amarchand Mangaldas
The lack of liquidity has been one of the most critical issues facing the real estate sector, even before the pandemic. Any measure to boost liquidity is, therefore, a welcome move. Specifically, the ability granted to NBFCs to extend loans to real estate projects by one year is expected to go a long way in mitigating the stress in the sector. Of course, the relief measures will need to be constantly revisited, depending on how soon the market can return to normal functioning.
Mihir Vora, Director and Chief Investment Officer, Max Life Insurance
The RBI announcement of the reverse repo rate cut, TLTRO 2 targeting NBFCs, refinancing via NABARD, NHB, SIDBI is very essential to support the weakest segments of the economy. The central bank has been proactive in addressing the pain in areas which were not getting the full benefit of the earlier measures. Widening of the LAF corridor by reducing the Reverse Repo rate further disincentives banks to park money with the RBI and encourage lending. The RBI also increased the WMA limit for States. This will defer supply of state governments and lower spreads on SDL borrowings, which had shot up last week due to large supply getting bunched up. TLTRO to be used for 50 percent large and 50 percent smaller NBFCs will help the NBFC sector which is under increasing stress of NPAs and liquidity. Standstill in asset classification and one time restructuring for commercial real estate will support banking sector stability.The steps will ease some of the burden on the financial system and will aid to keep credit flowing to the economy.
Bhavik Hathi, Managing Director, Alvarez & Marsal (India)
The liquidity measures announced by the RBI is a welcome move especially for the smaller NBFCs to survive in this market. The large NBFCs have multiple sources of funds so the liquidity may not get impacted that much. The smaller NBFCs on the other hand rely significantly on bank loans, and the customers are bound to opt for moratorium. The reverse repo cut by 25 basis points may not have a significant impact as both lenders and borrowers will remain cautious given the macro-economic situation and current market uncertainties.
Avinash Bagdi, Head-Finance, Covestro India
The RBI has further given a stimulus to the economy by announcing the second tranche of liquidity with a 25 basis point reverse repo cut taking it to 3.75 percent from 4 percent earlier and has also increased the WMA limit by 60 percent to provide greater comfort to states in order to mitigate the financial distress. With this move, the banks will now be able to lend more amid these current circumstances. A Target Long Term Repo Operations (TLTRO) of Rs 50,000 crore announced by the governor specifically targeting the NBFCs has come in the wake of downgrading of economic growth in the current fiscal. The bold step taken by the Reserve Bank of India (RBI) to ensure smooth functioning of banks and financial institutions will help the country to prevent the economic slowdown curve from steepening. The announcement of excluding moratorium period from 90-day NPA period will prove to be a relaxation of asset classification norms. In view of tightening the financial conditions, the decision to provide special refinance facilities of Rs 50,000 cr to NHB, SIDBI and NABARD is commendable.
Anurag Mathur, CEO, Savills India
The RBI has continued the fight against the COVID-19 pandemic, taking measures to maintain liquidity in the system, facilitate and incentivise bank credit flows, ease financial stress and enable formal working of the markets. The banking regulator has taken cognisance of the on-ground economic reality and announced an Rs 50,000 crore booster package for NABARD, SIDBI and NHB, addressing sectoral credit needs to a certain extent. The central bank’s decision to pump in Rs 10,000 crore to NHB for refinancing companies is expected to address some of the liquidity concerns in the residential segment. Although the repo rate has been kept unchanged, the reduction of the reverse repo rate by 25 bps is aimed at incentivising banks to increase credit flow in the markets. Concerning all accounts for which banks and financial institutions grant a moratorium, RBI indicated that the 90-day NPA norm would exclude the moratorium period.
Rakesh Singh, MD & CEO, ABFL
We welcome the proactive measures unleased by the RBI which will ease the financial stress, enhance liquidity, and improve credit supply in these unprecedented times. The borrowers will also get the much-needed relief in meeting their payment obligations. The decision to launch TLTRO 2.0 worth Rs 50,000 crore will help small and mid-sized NBFCs to remain adequately liquid and stable and continue to function normally. Special refinance facilities of Rs 50,000 to NHB, SIDBI and NABARD will give the necessary impetus to HFCs. And policies pertaining to the realty loans will incentivize the commercial real estate sector.
Aiswarya Ravi, CFO, Kinara Capital
The RBI has taken a step in the right direction today with a liquidity injection addressing some of the pain points of the industry and committing 50% of TLTRO 2.0 to small and mid-scale NBFCs and MFIs. However, for this money to flow down to the micro-and-small businesses, smaller NBFCs have to be considered beyond their ratings. Banks should review NBFCs on a case-by-case basis and not on the basis of ratings because this excludes many of the last-mile NBFCs who are serving the small business entrepreneurs. Another thing that will help last-mile and retail NBFCs is if the RBI can clarify the Moratorium issue which was not touched upon today. While many NBFCs have already passed on the Moratorium to their customers, Banks are unable to extend the same to NBFCs due to lack of clarity from RBI.
Lakshmi Iyer, Chief Investment Officer (Debt) and Head-Products, Kotak Mutual Fund
The announcement of TLRTO 2 directed towards the NBFC sector is a much-need initiative given the covid related moratorium optionality that this sector had to offer its borrowers. This should allow for more broad based availability of liquidity under this facility. The 25 bps cut in reverse repo would help bring down the short term rates by 25-50 bps as the banking system continues to be in surplus liquidity mode. We could see reduction in bank deposit rates too in the coming weeks.
Motilal Oswal, MD and CEO of Motilal Oswal Financial Services
Given the unprecedented times we are in, it is heartening that RBI is addressing all these challenges at a war footing. We believe, the key measures announced by RBI will help inject the much needed liquidity in the system, facilitate and incentivise credit flow and provide flexibility on regulatory forbearance. Markets are in buying zone. Keep accumulating and increasing equity allocations gradually.
Suyash Choudhary, Head–Fixed Income, IDFC AMC
The RBI Governor announced a new set of measures in response to the current growth and financial market stress. These measures are mostly aimed at easing some pressures on the lower rated/smaller participants of the financial markets. For the general bond and money markets, the major announcement pertains to a further widening of the liquidity adjustment facility corridor with the reverse repo rate being cut by a further 25 bps to 3.75 percent. The repo rate (the mandate of the Monetary Policy Committee) and the marginal standing facility rate are kept constant. Ways and means advance (WMA) facility for states has been enhanced by 60 percent (instead of the 30 percent) announced earlier, available till 30 September. Also, the liquidity coverage ratio (LCR) has been temporarily reduced to 80 percent.
Vinay Pai, Head-Fixed Income, Equirus Capital
The RBI has provided additional measures to smoothen the financial markets, ensuring liquidity and encouraging lending to keep the momentum in the credit cycle. The Governor mentioned that while the macro economic conditions have deteriorated since March 27th, ensue a sharp reversal in the condition, after the first round of TLTRO. The introduction of TLTRO 2.0 has been to address the concerns of NBFC and broaden the investment by banks through corporate bonds of Rs. 50,000 Crs to begin with, of which Rs 25000 crore will be to invest in NBFC and MFI.
By increasing the WMA limits from 30 percent to 60 percent, RBI has addressed the concern of State governments, who had rushed to the bonds market to raise bonds which led to a huge spike in SDL yields during the last fortnight now, can plan their market borrowing. Banks are sitting on huge liquidity, a further reduction in reverse repo by 25 bps from 3.75 percent from 4.00 will dissuade them from parking their money with RBI (currently 6.9 lakh crore) and lend onwards.
Kanwar Vivek, CEO, YES Asset Management (India)
It is interesting to note that RBI has, in effect, delivered 25bps rate cut outside of an MPC meeting even without tinkering with the policy repo rate. This step is an additional nudge for banks to move away from using this parking window disproportionately and shift idle cash to productive segments of the economy. The fears of bunching up of state borrowings in the initial months of current financial year to tide over liquidity needs at a time when revenues have been hit substantially for states had led to sharp rise in SDL spreads over corresponding g-secs in the recent weeks. This was exacerbating the financial challenges of state governments. Thus, increase in WMA limit of states by 60 percent over the level as on 31st March 2020 provides states a much-needed reprieve in tiding over short term liquidity requirements without duress. This should alleviate upward pressure on SDL spreads.
Lav Chaturvedi, ED & CEO Reliance Securities
The RBI, in its second unscheduled press conference, tried to offer a much-needed boost to revive the various industries by announcing a slew of measures.
Announcement of LTRO 2.0 mainly for NBFCs and refinancing companies, 25 bps cut in reverse repo rate, increase in WMA (Ways and Means Advances) limits, asset classification standstill, reduction in LCR to 80% and relaxation in NBFCs loan to commercial real estate projects are prompt and proactive thereby RBI tried to hit the nerve as to bring economy back to normalcy.
LTRO 2.0 amounting Rs 50, 000cr is mainly for investment grade medium and small size of NBFCs and HFCs, which we feel is sufficient enough to address the immediate liquidity crisis in these segments. Further, addition of Rs 50,000 cr window for refinance companies like NABARD, SIDBI and NHB are to aid NBFCs and MFIs. In a nutshell, we believe RBI has tried to give a perfect dose to improve liquidity in the system and address concerns of various sectors.
Umesh Revankar, MD and CEO, Shriram Transport Finance
The RBI`s announcement to infuse liquidity into the system is extremely welcoming and a big relief to NBFC borrowers. The decision to cut the reverse repo rate by 25bps will encourage banks to look for lending opportunities. We would appreciate if banks reciprocate positively to NBFCs request on moratorium to manage cash flow smoothly. All in all we think it is a positive step taken by the RBI to overcome the challenges faced by the economy.
Rajesh Sharma, Managing Director, Capri Global Capital
The RBI's announcement was timely measure with an aim to provide strong support to NBFC sector. The announcement to conduct additional TLTRO amounting to Rs 50,000 crore of which at least 50 percent is to be specifically invested in NCD, CP and bonds of small and mid-sized NBFCS and MFI, will address the demand for additional liquidity by financial institutions besides banks. The special refinance facilities of Rs 50,000 crore to NHB (Rs. 10,000 crore for refinancing housing companies), SIDBI (Rs 15,000 crore for MSME loans ) and NABARD (Rs 25,000 crore) will help meet credit need of MSME sector and housing finance which has been severely affected by COVID-19 . Further, NBFCs are allowed to exclude the moratorium period for NPA classification. Also, Real Estate project delayed for reasons beyond the control of promoters can now be extended by one year without asset classification downgrade by NBFCs.
George Alexander Muthoot, MD, Muthoot Finance
We welcome the positive move that the RBI has announced today to infuse liquidity into the system. Through the TLTRO 2.0 scheme, we expect the liquidity challenges in the system will be eased. The announcement on reverse repo rate cut by 25bps will motivate banks to explore further lending opportunities. We appreciate the measures that RBI is taking to combat and stabilize the economy amid the pandemic.
Shachindra Nath, Executive Chairman at UGRO Capital
The Central Bank's decision to earmark 50 percent of the TLTRO 2.0 for mid and small-level NBFC will ensure broader liquidity transmission in the NBFC sector. The cut in the reverse repo rate, NABARD, SIDBI, and NHB refinancing will boost the credit flow from the banking institutions to NBFCs. The ultimate beneficiary of the decision will be the SMEs which fulfill their working capital requirement from the mid-level and small-level NBFCs, especially if the focus of such measure is to ensure liquidity support to NBFCs looking to raise debt capital for increasing disbursals as opposed to those that need capital to meet liquidity shortfalls.
VP Nandakumar, MD and CEO of Manappuram Finance Ltd
The RBI Governor’s announcement of an TLTRO 2.0 of Rs 50,000 crore to be deployed in investment grade NBFCs besides Rs 15,000 crore to SIDBI for on-lending or refinancing is a welcome step. Of course, going forward, the size may have to be increased significantly. Earlier, the announcement by the Ministry of Home Affairs allowing NBFCs to restart their operations is a major positive development.
Real estate sector
Shishir Baijal, Chairman & Managing Director, Knight Frank India
We are extremely delighted and find a great sense of reassurance with the central bank taking cognizance of specific problems faced by real estate sector and proactively taking targeted measures to address those issues. The measures taken for liquidity support to NBFCs, HFCs and MFIs will meaningfully help the cause of the real estate sector. The move on reduction of reverse repo rate by 25 basis points shall push banks to open up the credit flow to economic activities. Similarly, allowing a 90-day extension for asset classification to loans that have been granted moratorium window is a critical step to assuage credit quality concern of lenders. Considering the lockdown and the impact on migrant labour workforce, there will be an inevitable delay in construction activity in real estate projects. Taking note of the situation, the central bank has provided one year project completion extension on asset classification for NBFC loans to CRE segment. Considering NBFCs have been very active in this segment, this announcement will ease the pressure of this segment, too.
Nish Bhatt, Founder and CEO, Millwood Kane International
The RBI announced measures to boost inject liquidity worth Rs 50,000 cr to ease the pressure in the system. As a part of this exercise, the central bank will provide Rs 10,000 cr to National Housing Bank (NHB) to support HFCs, and has allowed NBFCs to extend the date of commencement for loans given to commercial real estate without treating it as restructuring. This will provide relief to NBFC as well as the real estate sector. Slashing the reverse repo rate cut by 25 bps from 4 percent to 3.75 percent will discourage banks to park funds and lend to end-consumers. The real estate sector needs ease in lending rates to help boost demand. In a move to relax regulatory requirements, the RBI announced relaxation in asset classification for a period of 90 days.
Niranjan Hiranandani, President-ASSOCHAM and NAREDCO
From the perspective of regulatory norms to spur an economic revival, the measures announced aim to maintain adequate liquidity in the system, facilitate bank credit flow and ease financial stress. These are absolutely welcome, given that economic activity has come to a standstill during the lockdown. For real estate, the announcement that loans given by NBFCs to real estate companies would get similar benefits as given by the scheduled commercial banks is positive. The RBI had earlier permitted extension by one year without asset classification downgrade, if DCCO was delayed for reasons beyond control of promoters. This relief is now also allowed for NBFCs; loans by NBFCs to commercial real estate will get the same relief. This move will positively impact NBFCs and real estate.
Ashok Mohanani, Chairman, EKTA World and Vice President, NAREDCO, Maharashtra
The RBI’s announcement focused more on bank relief and commercial real estate. There was no mention of residential real estate. Certain announcements by the RBI Governor on the liquidity front will benefit in churning the economic cycle. A rate cut of 25 basis points to 3.75 percent from 4 percent is in favor in terms of RBI from banks. There is indeed a requirement for more clarity and focused announcements towards credit growth. The flexibility provided to NBFC on the DCCO by extension of one year is expected to provide relief to the borrowers in short-run for NBFC and the real estate sector. There is a need for focus on residential real estate and hope for some relief measure to be announced.
Anuj Khetan, Director, Vijay Khetan Group
In the wake of the COVID-19 crisis, the RBI’s announcement to reduce reverse repo rate by 25 basis points and additional liquidity for National Housing Bank will accelerate and facilitate bank credit flows towards the already stressed real estate sector. The allotment of Rs 10,000 crore to National Housing Bank will provide capital to HFCs and eventually provide major relief to developers battling liquidity issues in COVID-19 times. It is a welcome move and will offer liquidity to spice up the nationwide financial system. The banks should immediately transmit rate cuts to consumers and bring down home loan interest rates to 6 percent. This will help to push home buying and offset salary cuts that employees would be facing in the near future to prevent NPA. Also, additional measures such as one-year moratorium for commencement of business operations (DCCO) of project loans for real estate projects that are delayed for reasons beyond the control of promoters is a major relief and will provide much-needed aid to cash-starved builders.
Manju Yagnik, Vice Chairperson, Nahar Group and Vice President NAREDCO (Maharashtra)
We welcome measures announced by RBI Governor aimed at largely to maintain liquidity in the system, facilitating and incentivising bank credit flows and easing financial stress. These would prove to be a booster dose to the economy, impacted due to COVID-19 . Moves like provision of Rs 50,000 crore as a refinancing facility to SIDBI, NABARD and NHB and TLTRO 2.0 worth Rs 50,000 crore for NBFCs, HFCs and MFIs aim to boost liquidity in the system. Also, RBI's move to cut reverse repo by 25 bps to 3.75 percent would enable banks to lend more to end consumers, thus helping prospective home buyers. On the regulatory front, for all accounts where moratorium or deferment has been applied, there would be an asset classification standstill. The NBFCs have flexibility under the current accounting standards to provide relief to borrowers. Besides, there were other measures which would help micro and macro-economic scenario of the country. Though the growth has taken a hit due to COVID-19 predicted at 1.9 percent but the prediction for FY 2022 is bright with 7.4 percent. The RBI is closely monitoring the implementation of its measures announced in round 1 and now round 2.
Ashish R Puravankara, MD, Puravankara Ltd
The RBI announced several measures and guidelines that are essential for the phase-wise recommencement, post-lockdown. The key focus remains on ensuring adequate flow of capital in the market and the 25bps cut in the reverse repo rate is a step towards the same direction. The relief to the NBFCs will undoubtedly help the real estate sector, also the infusion of Rs 50,000 crore to NABARD, SIDBI (Small Industries Development Bank of India) and the National Housing Board will further ease the way ahead. Also it is a refreshing move that the loans given by NBFCs will not get categorised as NPAs even on non-repayment for a period of 1 year. But it is also essential that these measures should be implemented in a time bound manner to improve the overall operations (of the industry) and boost customer sentiments. Realty industry will have to revolutionize the way it operates to gain momentum, as it still remains the second largest employer and is an essential cog in India Inc. We hope, that all banks will incorporate these new rules, and we eagerly await the detailed guidelines on the same. The sector together with the various industry bodies have to devise a long-term systematic plan to ensure safe and prosperous work cultures.
Ram Raheja, Director, S Raheja Realty
In his second announcement since the COVID-19 outbreak, RBI Governor has laid out some relief measures to cushion the impact of the lockdown. The central bank’s resolve to ease the economic pain is commendable. The further revision in reverse repo rate should add to spurring liquidity in the system and it is a very positive measure. Additionally, the move to allow extension of NBFC loans to delayed commercial real estate projects by a year without restructuring brings about some much needed relief for the developers. COVID-proofing the economy is the need of the hour. We further hope to see some stimulus package from the government as well to help relieve the stress in the residential real estate sector.
Rohit Poddar, MD, Poddar Housing and Development; Joint Secretary, NAREDCO Maharashtra
At the headline level, the liquidity support specific to NBFC is a piece of welcome news. Reducing the reverse repo rate to 3.75 percent from 4 percent and Rs 50,000 crore booster package showcases RBI’s clear objective to safeguard the economics and strengthen the finance of the Indian society at large. NBFCs and HFCs, primary lenders to the real estate developers, will be the biggest beneficiaries. NBFCs now allowed to extend realty loans by 1 year, subject to project delay of unavoidable circumstances, should play up a positive sentimental value in the realty sector.
Hakim Lakdawala, Group Promoter, Goodwill Developers
The government, authorities and the RBI have been constantly taking cognizance of the situation and announcing measures to mitigate the impact of COVID-19 on the economy. The decision of revising the reserve repo rate from 4 percent to 3.75 percent is one such commendable step taken by the RBI. This step is intended to ensure cash flow and liquidity in the market. Allowing NBFCs, who have given loans to real estate companies to get similar benefits as given by the scheduled commercial banks, at a challenging time like this is an encouraging sign. Commercial real asset class loans will also observe a momentum as deferment of payment up to 1 year will allow developers more time to construct and deliver projects on time. With few construction activities looking to re-start post-20 April, we are hopeful that the situation normalizes and India moves to a path of recovery
Farshid Coopers, MD, of Spenta Corporation
The economic stress caused by the COVID-19 pandemic is being addressed at every juncture by the government and authorities like the RBI. Revising the reserve repo rate to 3.75 percent will promote the banks to infuse liquidity parked with them into the market thereby easing the liquidity. The real estate industry—cash-strapped for more than a year now—can expect a breather as loans given by the NBFCs. Furthermore, we hope that going forward, depending on how the re-opening of the economy pans out, the government will come up with several measures to ensure that the economy and job growth returns to normal functioning as soon as possible.
Rahul Gover, CEO, Sai Estate Consultants Chembur
We welcome the move of the RBI to give some breather to the economy and infuse liquidity in the market. However, it doesn't really change anything for the real estate industry as a whole. Actual cash flow and relief will be seen only when the lockdown is lifted and economy is past the COVID -19 crisis. Sentiment in the real estate industry lies low even if the government and the RBI have provided some respite. Continued support may be required to help this sector and the economy to revive till we deal with the pandemic's ripple effects.
Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group
After announcing several relief measures in his previous address to counter the economic slowdown, RBI governor Shaktikanta Das's new measures announced on 17 April will bring adequate liquidity in system, facilitate bank credit flow, ease financial stress and help India emerge as a leader in a post COVID-19 world. The IMF projection of India is a promising indication for the economy to bounce back in the near future. Relaxations for real estate is also important as the sector employs a large number of people. These are certainly very good announcements particularly on the liquidity front and will ensure that even the smaller players will also get access to liquidity.
Anirban Chakraborty, Managing Director & CEO, Tourism Finance Corporation of India
We welcome RBI’s stance to support the economy amidst these trying and uncertain times. The announcement brings much-needed relief to the sectors with an eye on the developing situation at the ground level. We welcome the TLTRO 2.0 impetus, which provides much needed liquidity to small and mid-sized NBFCs, MFIs and corporates. Further, pragmatic measures such as the Rs 50,000 Crore refinancing window from AIFIs (such as NABARD, SIDBI and NHB), DCCO extension for CRE sector, pause on dividend declaration by banks, reduction in LCR requirement to name a few, deserve appreciation. We, however await more sector-specific relaxations in the immediate future.
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