Bankers welcome RBI's 'bold, decisive' measures

Bankers on Friday termed the measures announced by the Reserve Bank of India as bold, decisive and unprecedented that were much needed to support the economy amidst the coronavirus pandemic. In the seventh bi-monthly monetary policy announced on Friday, the Reserve Bank reduced the repo rate by 75 basis point, maximum in 15 years, to 4.40 per cent from 5.15 per cent.

The RBI had reduced repo rate by 100 basis points in March 2004. The central bank also announced to provide Rs 3.74 lakh crore liquidity to banks through reduction in cash reserve ratio, by conducting targeted long term repos operations (TLTRO) and by increasing the limit for marginal standing facility (MSF) to 3 per cent.

"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. Given that we are in exceptional times, RBI has played the role of championing the cause for the economy and financial system," State Bank of India Chairman Rajnish Kumar said. Punjab National Bank (PNB) Managing Director and CEO S S Mallikarjuna Rao said the RBI's decision has been very bold in terms of addressing current challenges faced by the economy.

"All the measures taken, whether repo rate reduction, CRR cut, TLTRO, moratorium on repayments and infusion of liquidity have been unprecedented and in right context," Rao said. According to Standard Chartered Bank CEO Zarin Daruwala, "The bold steps initiated by the Monetary Policy Committee should help financial markets tide over the current situation." The RBI allowed a repayment moratorium for three months on all term loans outstanding as on March 1, 2020.

The relaxation is applicable to borrowers of all commercial banks, including regional rural banks, small finance banks and local area banks, co-operative banks, All-India Financial Institutions, and NBFCs, including housing finance companies and micro-finance institutions. Kumar said 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.

HDFC Bank's chief economist, Abheek Barua, said a day after the government announced a Rs 1.7 trillion fiscal stimulus, the RBI introduced its own version of the stimulus package which includes a number of measures to ensure financial stability and to stem the economic fallout from the spread of the coronavirus. "While the repo rate cut delivered was sharp, transmission to borrowing costs for severely hit sectors (such as aviation, hospitality) could remain limited," Barua said.

Kotak Mahindra Bank's group president (consumer banking), Shanti Ekambaram, said, "Most reassuring were the statements by RBI that they will continue to stay very vigilant and will do what it takes to support the economy in the wake of the pandemic, through both conventional and unconventional instruments." The fact that the RBI is vigilant of the situation and has promised "whatever steps necessary" to mitigate the coronavirus impact on the economy will allay all fears, Indian Bank Managing Director and CEO Padmaja Chundru said. "All in all it is a welcome and a commendable step. It will revive growth and preserve financial stability; and ensure normal functioning of financial markets," she said.

Bandhan Bank Managing Director and CEO CS Ghosh said the RBI's focus clearly 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. Lakshmi Vilas Bank's treasury head, R K Gurumurthy, said, "Possibly for the first time in the history of the central bank have we seen such a wide ranging and stellar economy-supporting measures and these will certainly have a salutary effect in addressing the macroeconomic risks from the pandemic COVID-19." SBM Bank India Managing Director and CEO Sidharth Rath said liquidity injection to the banking system and relief through forbearance for the retail and corporate borrowers will enable the banks to navigate the current crisis in a 'near non-disruptive' manner.