Small borrowers and lenders, health sector institutions and stability of market liquidity were the key focus areas of the RBI’s policy announcements.
IMC President Mr Rajiv Podar said the RBI has reassured the market that it will continue to be proactive and take steps to protect the businesses with special emphasis to individuals, small business and MSMES. "Small Finance Banks and MFIs lending under Priority sector lending is a welcome step," Podar said.
Incentiving lending of 50,000 crores to Health care services , patients, vaccines and medicine manufacturers is a much needed timely measure
Satish Kumar, Research Analyst, Choice Broking, said: The RBI announced restructuring 2.O for small borrowers (individuals & MSMEs) and also announced term liquidity facility of Rs 50,000 cr for lending to emergency health services providers. Term liquidity of Rs10,000 cr announced for SFB and further SFB’s credit to MFI will be considered at priority sector lending. Govt to purchase of Rs35,000 of G-Sec to maintain market liquidity.
Mohit Nigam, Head, PMS, Hem Securities said the RBI has reassured the small and impacted sectors of the economy through various liquidity and restructuring measures like continuation of on tap liquidity window at concessional rates, SLTRO & categorization under Priority Sector Lending. "It has also targeted softening of yield curves along with liquidity support to the economy through GSAP 1.0 (Government Securities Acquisition Programme). While the RBI Governor has expressed concerns about the prevailing covid situation & mixed high frequency indicators in April, the measures announced today might not give a major boost to the equity markets but are likely to provide downside support & will act as a confidence booster," Nigam added.
Aashit Shah, Partner, J Sagar Associates said the announcements made by RBI today will benefit the MSMEs and small businesses who have been adversely impacted by the second wave of the pandemic. They will also provide much needed liquidity to the emergency healthcare sector to battle the proliferating spread of the virus. "Additional restructuring guidelines for to MSMEs, small businesses and individuals will assist them tide over the uncertainties caused due to the second wave. These guidelines as well as the recently introduced pre-arranged insolvency resolution process will enable MSMEs to restructure their debts without the looming fear of losing or liquidating their businesses.” Shah added.
The RBI governor has announced a slew of measures to provide liquidity support and debt relief for the stressed health care sector and small businesses in the wake of the additional dislocation caused by the recent surge in Covid cases and escalating deaths in the country. Alok Sheel - RBI Chair Professor in Macroeconomics at Indian Council for Research in International Economic Relations (ICRIER), said the "amounts involved are not very large, and some might even add that he sounded more upbeat regarding the situation going forward than is warranted given the present uncertainty. He has nevertheless indicated that RBI is keeping a close watch on the situation and would come up with additional measures, including unconventional, should the situation so require. This would no doubt reassure markets," he said.
Terming the RBI's policy announcements 'pragmatic' in handling the COVID crisis, Anshuman Panwar, Co-Founder, Creditas Solutions, said while the RBI has not announced a blanket moratorium, stressed borrowers have been given a choice to opt for resolution if required. This will ensure that only those who genuinely need restructuring of their loans will approach the banks. "It will help counter financial stress in the system.”
Welcoming the RBI announcements, Hardika Shah, Founder and CEO, Kinara Capital said the one-time restructuring and extension of moratorium is definitely a welcome relief to an already stressed sector. "The MSMEs had just about recovered from the ramifications of last year's pandemic and 2021 had begun on a more positive note for small businesses who were looking to scale up this year. However, the unexpected COVID surge and subsequent lockdowns is pushing the MSME sector to its limits. The new allowances will save many small businesses who in turn are our surest bet to economic recovery in India given MSME contributions to national GDP, exports and to job creation," Shah said.