RBI measures will improve confidence in financial system'

RBI measures will improve confidence in financial system'

Presently, despite the measures taken to infuse liquidity, banks have been reluctant to lend while demand too has been muted.

Sanjay JogUpdated: Saturday, March 28, 2020, 05:00 AM IST
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RBI |

MUMBAI: Industry players and stakeholders have welcomed the RBI’s measures to address the stress on the economy caused by the pandemic, saying that they would greatly help improve sentiments and confidence in the financial system.

Credit rating agency CARE said that although the policy rate has been reduced to a decadal low, it needs to be seen if the transmission of the same by the banks materialises and whether they would be willing to extend loans to businesses and segments that have been hit by the economic disruptions caused by the virus.

Presently, despite the measures taken to infuse liquidity, banks have been reluctant to lend while demand too has been muted.

However, in the wake of the outbreak, several companies will be seeking fresh credit to keep up with operations once normalcy returns and these new measures should help. CII director general Chandrajit Banerjee said measures announced by RBI will address the financial stress in the system on account of the outbreak and the consequent lockdown.

The substantial reduction in the CRR will help banks to reduce their lending rates and aid monetary transmission. The increase in the corridor between the repo and reverse repo rates will discourage the banks from parking money with the RBI,’’ he noted.

Given that the current lockdown is expected to have a negative impact on the cash flows of companies, Banerjee demanded that the moratorium on the repayments of term loan should be extended beyond three months in case the impact of the outbreak lasts longer than expected. On the other hand, FICCI president Sangita Reddy insisted that all the relaxations are being transmitted by banks in full and without delay.

"Our companies today need liquidity for survival. If the money released to the system reaches the corporates through greater lending, investments in commercial paper, nonconvertible debentures and corporate bonds, we will be able to see through this difficult phase,’’ she viewed.

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