RBI Monetary Policy: CSB Bank, CREDAI, Lakshmi Vilas Bank, State Bank of India, Shriram Transport
Posted on: 07/Aug/2020 10:40:49 AM
Mr. CVR Rajendaran, CEO & MD, CSB Bank on the RBI Monetary Policy
"This is a progressive step and should increase the demand for gold loans. This will put more money in the hands of the borrower. The increase in LTV Ratio will help us to grow the book. While this move will help broaden the gold loan market, we will also witness an increased competition in this segment. Lenders will need to ensure that their valuation and risk management processes remain tight and robust."
Mr. Satish Magar, CREDAI statement on RBI Monetary Policy
CREDAI welcomes RBIs announcement of infusing additional liquidity of Rs 10,000 crore through NABARD and NHB as this will increase the access and availability of funds for the cash-starved real estate sector. The extending timeline for restructuring the stressed MSME loans till 31st March 2021 is an encouraging step as the MSME sector is a backbone of our economy and forms a large part of the real estate development industry.
However these measures are not enough for the revival of the economy and there is an urgent need for restructuring of stressed loans in all sectors, specifically the real estate industry as it is in dire straits from a very long time even before the pandemic has hit the world economies. The expert committee formation under Mr. KV Kamath’s expertise and leadership is being constituted to look into the loan recasting matters and we at CREDAI are hopeful that it will also address our pertinent request of one-time restructuring of the loans for the real estate sector as this is crucial for the survival of the sector and for the large number of people whose livelihoods are dependent on it.
Mr. R.K.Gurumurthy, Treasury Head, Lakshmi Vilas Bank on the RBI Monetary Policy
RBI`s rate-setting committee, the MPC, left rates unchanged and even the stance of easy monetary conditions remains unchanged. While this was expected, the market may feel initially disappointed as the policy leaves the steepness of the rate curve unaddressed, coming as it does at a time when growth is totally absent.
RBI`s caution on rates is driven by the fact that retail inflation is rearing its ugly head with food inflation remaining sticky and higher. RBI, therefore, expects elevated inflation readings for a few more months, although core inflation is soft. The positive thing is that RBI would continue to be watchful and has not yet cried halt to the easing cycle.
While there was nothing on key policy rates to write home about, a few developmental measures with regulatory tweaks will go a long way in providing stability to key sectors of the economy. Will have to wait and see detailed circular guidelines for the finer aspects of these measures as one of the measures that relatate to capital charge on debt schemes of mutual funds could be a game changer.
Mr. Rajnish Kumar, Chairman, SBI and Chairman, IBA on RBI Monetary Policy
The Reserve Bank of India’s today’s monetary policy statement draws a fine balance between the challenges posed due to COVID-19 pandemic shock and the need to support growth and financial stability. On the macroeconomic front, the outlook to growth continues to be negative with RBI refraining to give any number to the extent of GDP contraction on account of COVID-19. The asymmetric recovery across rural and urban areas poses a challenge in policy formulation. The outlook on inflation is equally uncertain as supply shock has limited the scope of monetary policy in containing risk. On the balance, demand shock appears to net out the supply shock on price levels. On the regulatory and development policy front, the RBI has carefully addressed the concerns emanating from the wider market participants. Notably, the RBI has addressed the need to offer some form of restructuring facility for standard accounts that are facing difficulty in debt restructuring. We welcome the fact that a new Resolution Framework for COVID-19-related Stress facility has been extended to large corporate, SME, and personal loans with necessary safeguards in each segment.
The announcement on CRR, the mechanism to check and track multiple operating accounts by large borrowers will benefit the industry at large. Harmonizing the capital charge for market risk for debt and equity mutual funds is also a good move towards capital conservation given the volatility has increased after COVID-19 pandemic. In conclusion, the decision to hold the policy rate is a prudent one in the prevailing circumstances as the trajectory of economic growth, inflation, and external demand continue to remain uncertain. RBI’s calibrated approach is in perfect consonance with the evolving situations while keeping enough headroom for the future.
Mr. Umesh Revankar, MD and CEO, Shriram Transport Finance on RBI Monetary Policy
RBI maintained status quo on policy rates but said that the accommodative stance will continue as long as necessary to revive growth and mitigate the impact of the pandemic. In this direction, the central bank has decided not to extend the moratorium and has instead allowed lenders to restructure some loans which is a positive change as account classification will remain standard and this will also ease provision requirements ahead. This is a welcome step and coupled with earlier measures taken by the regulator to ensure adequate liquidity and bring down borrowing costs, it will surely enhance the financial stability of the system.
