RBI Governor LIVE: Shaktikanta Das rolls out stimulus measures amid 2nd Covid-19 wave; liquidity, credit, more

RBI Governor LIVE: Shaktikanta Das rolls out stimulus measures amid 2nd Covid-19 wave; liquidity, credit, more
shaktikanta das, RBI, RBI meetThe second purchase of G-SEC for Rs 35,000 crore under G-SAP 1.0 will be conducted on May 20, 2021. (File image)

RBI Governor LIVE: RBI Governor Shaktikanta Das on Wednesday unveiled liquidity support measures amid rising Covid-19 cases in India. RBI Governor Shaktikanta Das said that the 2nd wave of COVID-19 in India has drastically altered the economic situation. He added that RBI will continue to monitor emerging situation, using all resources. India had flattened the inflation curve but the situation altered. He also added that the quarantine facility of the RBI continues to operate with more than 200 officers working away from their homes. He announced that the second purchase of G-SEC for Rs 35,000 crore under G-SAP 1.0 will be conducted on May 20, 2021. Among liquidity measures, he announced on-tap liquidity window of Rs 50,000 crore with tenure of up to 3 years at repo rate being opened till March 31, 2022. RBI also announced targeted long-term repo operation for small finance banks (SFBs) of up to Rs 10,000 crore. This will be used for lending of up to Rs 10 lakh per borrower. Das said that it is during the darkest moments that we must focus on the light. “We have lessons to draw from our experience of last year when as a nation we came together and overcame the once in a generation challenge imposed by the first wave of the pandemic,” Das said. “Our faith should be like an ever-burning lamp which not only gives us light, but also illuminates the surroundings,” Das concluded.

RBI Governor Shaktikanta Das in an unscheduled speech today provided more liquidity support and a larger tranche of G-SAP 1.0. We think the RBI’s normalisation cycle is likely to be on hold, unless the outlook for growth improves. The steps should add to the liquidity support measures implemented since the emergence of the pandemic, which we estimated amount to more than INR14.2trn. Today’s measures follow some fiscal moves, including the allocation of INR260bn to reinstate the free food grain distribution scheme, aimed at benefiting 800mn people. Rahul Bajoria, Chief India Economist, Barclays India

RBI’s measures announced today have largely addressed the need of small borrowers, individuals as well as businesses, and MSMEs who have been amongst the worst affected in the second resurgence of Covid. Besides liquidity measures, easing lending to the above strata by extension of restructuring, boosting medical infrastructure through PSL recognition will help bring relief in the financial ecosystem. We believe small finance banks like Ujjivan, Equitas and MSME lenders such as DCB, City Union to benefit from some of these measures. Naveen Kulkarni, Chief Investment Officer, Axis Securities

In an attempt to jumpstart micro, small, and medium enterprises (MSME) in the country reeling under the second wave of the Covid impact, Reserve Bank of India Governor Shaktikanta Das on Wednesday announced multiple relief measures. The support largely centered around easing credit concerns for MSMEs, small businesses, and individuals.

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An announcement from the RBI Governor comes in at a time when the second wave of the pandemic is negatively impacting economic activities and threatens to derail the recovery witnessed in Q1CY21. Maintaining its stance of providing monetary support, the RBI Governor announced measures to support healthcare infrastructure, protecting the interests of small businesses, individual borrowers, and safeguarding the macro-economic fundamentals. The step to categorize Small Finance Banks’ on-lending to Micro Finance Institutions (MFIs) as priority sector lending will ensure liquidity for small businesses. Vikash Khandelwal, CEO, Eqaro Surety Private Limited

“We have witnessed the pandemic in the country very closely. I would term this second wave, a Tsunami and this relief from the RBI Governor today is truly a sizeable boost across all stakeholders in the Healthcare sector; Hospitals, Pharmaceuticals, Healthcare equipment manufacturers, Health-tech companies and also directly to the patients. We value this announcement and find it benevolent for the Healthcare sector. We assure to continue as one of the prime players in making country become- ‘ Healthy India’  and I am sure this way,  the next decade, is the decade of Healthcare,’ said Dr Vivek Talaulikar, CEO at Global Hospital – Mumbai.

Reserve Bank of India Governor Shaktikanta Das, in his address today has proposed to provide restructuring options for the borrowers who are finding it difficult to repay loans on time. The new restructuring 2.0 options will be available to individuals and small businesses who had availed the restructuring earlier and even for those who had not availed it earlier.

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The battle with COVID-19 has prolonged over a year now and while the country was coping well until early this year, the second wave of infections in March has translated into significant loss of lives. Presumably on economic output, the dent will depend on the timeline of this wave and associated regional lockdowns. Hence, proactive measures by the RBI, at a juncture where most economic indicators until March 2021 are continuing to show improvement, are welcome and reassuring. Expansion of liquidity window particularly to the healthcare sector is a need of the hour. Besides, additional liquidity window and resolution mechanism for loan restructuring for small and medium business will cement their position to cope up with the adverse demand conditions created by this more severe wave of pandemic. We believe that the central bank will keep its guard on in the ensuing period and take steps as warranted by the evolving on ground economic situation. Rajani Sinha, Chief Economist & National Director – Research, Knight Frank India

The RBI has always been ahead of the curve, additional relief and liquidity measures were required post the second wave of COVID19 cases that broke out in April. The measures announced will support the funding requirements of the healthcare, medical facilities, beef-up vaccine manufacturing for domestic inoculation. MSMEs and individuals borrowers will benefit from the extension in the moratorium. The RBI’s intent to take further measures if need be to provide relief, focus on the post-COVID future will send the right signal for the markets. Nish Bhatt, Founder & CEO, Millwood Kane International

The Reserve Bank on Wednesday asked banks and other regulated financial entities not to impose any punitive restriction against customers for failure to update KYC till December end, in view of the second wave of coronavirus cases. The RBI has also decided to extend the scope of video KYC (know-your-customer) or V-CIP (video-based customer identification process) for new categories of customers such as proprietorship firms, authorised signatories and beneficial owners of legal entities.

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We welcome the Reserve Bank of India’s move for one time restructuring of loans of upto ₹25 crore for individuals and small businesses under Resolution Framework 2.0. Given the current COVID-19 situation and its impact on individuals and businesses, RBI could not have done otherwise. It is a welcome move and will help the financial ecosystem. Ravindra Sudhalkar, CEO, Reliance Home Finance

RBI announced key measures to support lending institutions across the categories, which are required to withstand the challenges from second wave of COVID-19 crisis. On tap liquidity window of Rs500bn for three years at repo rate to support healthcare chain and classifying this lending as priority sector lending (PSL) augurs well. Further, reopening of one-time restructuring of loans for individuals and MSMEs amounting up of Rs250mn is a fantastic move to support banks and NBFCs having exposure in retail segment. Additionally, declaring PSL status for lending by SFBs to small MFIs of asset size upto Rs5bn and targeted LTRO of Rs100bn for SBFs bode well for SFBs. We further believe that announcement of second tranche of Rs350bn purchase of government’s bond under G-SAP 1.0 is likely to result in further softening of bond yields. Overall announced measures certainly bode well for banks and NBFCs. Binod Modi, Head Strategy at Reliance Securities

The pressure on the short term premiums seems receding as May month premium fell from 45-48 paise to 32-34 paise after RBI calm down the nerves by sending a strong signal in favor of further flattening of the yield curve. The relief measures could support the ongoing chaos regarding COVID disruption in the financial activity and hence volatility in the Rupee could be under RBI’s control. The fall in cost of hedging the nearest future month will support the importers to take advantage of lower spot ahead of depreciating foresight for the May month Amit Pabari, managing director, CR Forex Advisors

Re-opening of the one-time restructuring will certainly provide much-needed relief to individuals and MSMEs impacted by the slow down caused by the second wave of the pandemic. In addition to this on tap liquidity and other measures for easing liquidity pressure will help in expansion of production capacities for manufacturers including those operating in the high-priority medical sector. Moin Ladha, Partner, Khaitan & Co

Given the potential ravaging impact of the 2nd wave of Covid-19 on the economy, extension of one-time re-structuring (OTR) under the restructuring scheme 2.0 will a more effective and beneficial remedy for both the lenders and borrowers rather getting into a bankruptcy situation under the Insolvency and Bankruptcy Act, 2016 (IBC). Also, currently, the economy is running on very thin ice. So, the OTR should help avoid any systemic risk which can easily slip through the cracks. Nishant Singh, Partner, IndusLaw

The RBI has incentivised banks to offer these facilities by including them within the PSL targets of banks, and also permitting them to deposit the surplus liquidity up to an amount equal to their “Covid Loan” book with RBI at a rate which is 40 basis points higher than the normal reverse repo rate. This will ensure that banks accelerate the provision of liquidity for emergency healthcare services so that India is better equipped financially to deal with the pandemic. Further, 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. Aashit Shah, Partner, J Sagar Associates

The announcements made by RBI today will benefit the MSMEs and small businesses that 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. A new term liquidity facility for healthcare sector at the repo rate will aid in ramping up covid related healthcare infrastructure and production and supply of essential healthcare products such as vaccines, oxygen and ventilators. It will also benefit patients burdened by unaffordable covid related medical bills. Aashit Shah, Partner, J Sagar Associates

Extension of priority sector lending to the entities making a difference in these times will be a win for the borrowers and the banks, which will lead to meaningful deployment of funds towards causes which demand and require attention. Veena Sivaramakrishnan, Partner, Shardul Amarchand Mangaldas & Co.

The crucial change is the expected extension of one-time restructuring as an option for individuals and MSMEs. Since December and what was seen at the Financial Year-end too, it was anticipated that some relief from asset downgrade for the borrower and provisioning requirements for the lenders, would be the need of the hour. Other entities would also seek similar extension, if not other concessions in due course. Focused special long-term repo operations for small finance banks, in addition to the measures to enable such banks to lend to the microfinance institutions is also a step in the right direction and reflects the efforts towards financial inclusion and access to liquidity in these times of stress. This will certainly be beneficial in the short run, in addition to allowing such institutions to tide over immediate liquidity crisis. Veena Sivaramakrishnan, Partner, Shardul Amarchand Mangaldas & Co.

The series of measures announced by the Reserve Bank of India will surely help mitigate the financial distress triggered by the second wave of COVID. The central bank has shown lot of foresight by announcing flow of unhindered liquidity to the healthcare sector in order to boost production of vaccine, Covid related medicines and ramp up oxygen supplies. That this special lending window of Rs 50,000 crore has been classified under priority sector lending will ensure steady flow of loans to the healthcare sector that is at the forefront of India’s valiant battle against the virus. In a bid to further encourage to lend to healthcare companies, RBI has also given incentive to banks. The decision to offer restructuring to borrowers including MSMEs with aggregate exposure of upto Rs 25 crore is also a welcome move since small entrepreneurs and individuals are the most vulnerable segments. Rashmi Saluja, Executive Chairperson, Religare Enterprises Ltd

With the fresh challenge of the historic rise in COVID cases and shortages of vaccines owing to the fury of the second wave of the pandemic, the measures taken by RBI are well-timed. The restructuring of loans for loans under 25CR by NBFC is a smart move to ease the burden on the borrower. SMEs and MSMEs have played a critical role in driving the economy over the last few years. Furthermore, the MSME sector has had a restructuring window since March 2019, and extending it by two years would not only benefit the MSME sector but will also help the system in generating more liquidity Rohit Poddar, Managing Director, Poddar Housing and Development Ltd

The three year facility, which the banks can advance, to the of Rs. 50,000 Crs, is a good measure to immediately help ramp up medical and healthcare facilities. The benefits of this will help enhance capacity for the longer term as it covers diagnostic, preventive as well as combative aspects of healthcare. The smaller entities like micro finance institutions also benefit from the current package, which will bring some relief to them too which is one of the worst affected sectors as of now. Joseph Thomas, Head of Research, Emkay Wealth Management

In its limited space, the RBI governor announced few measures to support the economy dealing with the second wave of the pandemic. Though a loan moratorium was not announced, restructuring of loans could bring some relief to the borrowers. To incentivize lending, banks can park money equal to COVID  book with the RBI at 40 bps above the reverse repo rate. Similarly, lending to MFIs would be categorised as priority sector lending that could also support credit growth in the economy Deepthi Mathew, Economist at Geojit Financial Services

Governor Shaktikanta Das reassured the nation and markets that the RBI would be proactive to ameliorate the pain and help businesses & boost the economy. Term liquidity of Rs 50000 cr as on-tap liquidity for access to the emergency health facility, 3-year TLTRO for small finance banks, another installment of G-SAP of Rs 35000 cr, lending by SFBs to MSMEs to be classified as priority sector lending… are all timely steps in the right direction. The fact that there is no moratorium announcement will be seen by the markets as positive since the message is that the situation is not bad as to warrant another moratorium VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services

RBI has reassured the small & impacted sectors of the economy through various liquidity & restructuring measures like a 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. Mohit Nigam, Head, PMS, Hem Securities

Small borrowers and lenders, health sector institutions and stability of market liquidity were the key focus areas of the RBI’s policy announcements. The RBI announced restructuring 2.0 for small borrowers (individuals & MSMEs) and also announced term liquidity facility of Rs50,000 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 Rs 35,000 of G-Sec to maintain market liquidity. Satish Kumar, Research Analyst, Choice Broking

Our faith should be like an ever burning lamp which not only gives us light, but also illuminates the surroundings, Das concluded

RBI Governor Shaktikanta Das announced the rationalisation of KYC compliance norms, provided for video-based KYC for certain categories

It is during the darkest moments that we must focus on the light. We have lessons to draw from our experience of last year when as a nation we came together and overcame the once in a generation challenge imposed by the first wave of the pandemic, Das said 

The immediate objective is to preserve human lives, restore livelihoods, through all means possible

Counter cyclical provisioning buffer held by banks as of Dec 31, 2020, for making specific provision for NPAs up to March 31, 2022. 

The maximum number of days for overdraft facility by states has been enhanced to 50 days from 35 days earlier, which will be valid up to September 30, 2021

RBI Governor Shaktikanta Das said that borrowers up to Rs 25 crore, who have not taken restructuring earlier and were standard as of March 2021, will be considered for restructuring till September 30, 2021

RBI has reopened one-time restructuring for individuals, MSMEs. Borrowers will be permitted one-time restructuring till September 30, 2021. Under the restructuring 1.0, the period of moratorium can be extended up to a total of 2 year

Banks will have COVID loan book and will earn 40 basis points more under Reverse repo

SFBs will be allowed to on-lend to smaller microfinance institutions of asset size up to Rs 500 crore

RBI announced targeted long-term repo operation for small finance banks (SFBs) of up to Rs 10,000 crore. This will be used for lending of up to Rs 10 lakh per borrower.

On-tap liquidity window of Rs 50,000 crore with tenure of up to 3 years at repo rate being opened till March 31, 2022

The forecast of a normal monsoon by IMD is expected to sustain rural demand and overall output in 2021-22

Shaktikanta Das said that the second purchase of G-SEC for Rs 35,000 crore under G-SAP 1.0 will be conducted on May 20, 2021

CPI inflation remains benign for major advanced economies. High WPI inflation shows consistent pressure from input side.

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