E-Paper
RBI’s big Covid-19 move: Leaders to experts, who said what
The cash reserve ratio was cut by 100 basis points to 3 per cent to boost liquidity. The central bank also put on hold EMI payments on all term loans for three months.
The Reserve Bank of India (RBI) cut interest rates on Friday, responding to the nationwide lockdown in the wake of the Covid-19 outbreak. It slashed the repo rate by 75 basis points (bps) to 4.40%. The reverse repo rate was cut by 90 bps to 4%. The cash reserve ratio was cut by 100 basis points to 3 per cent to boost liquidity. The central bank also put on hold EMI payments on all term loans for three months.
Prime Minister Narendra Modi on Twitter: “Today @RBI has taken giant steps to safeguard our economy from the impact of the Coronavirus. The announcements will improve liquidity, reduce cost of funds, help middle class and businesses.”
Finance minister Nirmala Sitharaman appreciated RBI governor Shaktikanta Das’s reassurance on financial stability. “The three-month moratorium on payments of term loan instalments (EMI) & interest on working capital give much-desired relief. Slashed interest rate needs quick transmission,” she said on Twitter. “The macro economic fundamentals of the Indian economy are sound, and in fact stronger than what they were in the aftermath of the global financial crisis of 2008-09,” she added.
Also read: Coronavirus cases cross over 700 in India, RBI makes key announcement
Confederation of Indian Industry (CII) director general Chandrajit Banerjee: “Given that the current lockdown is expected to have a negative impact on the cash flows of companies, the moratorium on repayments of term loans for a period of 3 months will help companies tide over this period. However, CII would urge that this period be extended further in case the impact of the virus outbreak lasts longer than expected. The RBI governor did well to provide the assurance that all instruments are on the table to protect the economy and the financial system from either an excessive downturn or volatility.”
Former finance minister and Congress leader P Chidambaram: “I welcome the RBI’s decision to cut the repo rate and measures to provide more liquidity. However, the RBI’s direction on deferment of EMI dates is ambiguous and half-hearted. The demand is that all EMI due dates must be automatically deferred.”
Pronab Sen, economist and former chief statistician of India, expressed his concerns about the demand side. “There is a huge increase in potential liquidity in the system, but the real question is, what do we expect on the demand side. Assumption is that there is a repressed demand for credit. But I’m not sure, who?”.
Cyril Amarchand Mangaldas managing partner Cyril Shroff: “The RBI has unleashed a bazooka to deal with the economic pain and uncertainty prevailing in the wake of the Covid-19 crisis. Acting swiftly and decisively, the RBI has used several levers to increase liquidity in the system. This empowers banks to commence or continue the emergency Covid-19 credit lines opened up by several banks. Crucially, in recognition of the inevitable stress in the next few months, the RBI has permitted all lenders regulated by it to provide a moratorium on all instalments for term loans and interest payments on working capital loans- specifying that such a payment moratorium will not result in an adverse asset classification. This provides a much needed respite for borrowers and lenders in these trying circumstances and should soften the recovery period.”
Max Life Insurance director and chief investment officer Mihir Vora: “The steps taken by RBI and the welfare/stimulus announced yesterday (Thursday) by the Government are in sync with rest of the world as conventional and unconventional measures are being used by Government and Central Banks to counter the economic impact of the Coronavirus crisis. Governor also kept the option of more such measures if needed. We believe that given the gravity of the situation, further actions by RBI and the Government are likely in the coming weeks.”
