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Economist and experts applauded the RBI’s efforts

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The central bank also lowered the reverse repo rate by 90 basis points.

Economist and experts applauded the Reserve Bank of India (RBI)’s efforts and touted it as the central bank’s “whatever it takes” moment as it finally bit the bullet on Friday and responded to the coronavirus-induced crisis with a whopping 75 basis points cut in the repo rate, bringing it down to 4.4 per cent, its lowest ever. 

The central bank also lowered the reverse repo rate by 90 basis points. It advanced the policy review and the Monetary Policy Committee met over March 24, 25 and 26 to analyse the situation caused by the unprecedented lockdown of the nation and all business activities before responding with the massive rate cut. 

Dhiraj Relli, MD & CEO, HDFC Securities
Massive liquidity infusion via CRR rate cut of 100bps, MSF, especially targeted LTROs for onward lending to corporates would ease the elevated yields. Relief to the borrowers by way of a moratorium on term loans for 3 months, deferment of interest payment on working capital loans is a big positive. Overall, MPC gave more than what was expected and assured to resort to more measures if the situation worsens. The impact of these measures on the economic growth could take some time to fructify. Financials will get breathing space as far as recovery and NPA recognition is concerned. It could elevate sentiments temporarily but the main impact will be visible post the lifting of lockdown. In the interim softer yields could benefit investors in Gsec/other debt papers (including Banks) to book some MTM gains. 

Rahul Bajoria, Chief India Economist, Barclays
“The RBI has surpassed expectations by delivering more than what the market anticipated, and its promise to ‘do whatever it takes’ has come good. The steps to ease working capital pain, reduce liquidity costs and provide moratorium on term loans will alleviate stress across various sectors. We continue to see rates dropping to 3.50 per cent by August 2020.” 

Upasna Bhardwaj, Senior Economist, Kotak Mahindra Bank
RBI, very correctly so, announced a comprehensive bazooka covering all aspects of the economy by taking measures system-wide both through liquidity, rates and regulatory forbearance (retail as well as for industry) and also targeted measures to manage the corporate bond markets. The measures should help in tiding through the end of the year issues which many banks/institutions were fearing and will go a long way in cushioning the dislocations in various markets. We expect additional scope for 40-50bps of rate cut with any further easing and extension of measures depending on the nature of spread of COVID-19. 

Navneet Munot, ED & CIO, SBI Mutual Fund
While India has limited fiscal space, monetary policy continues to do the heavy lifting at a time when growth is at a severe risk in the near term. We need to explore unconventional measures on fiscal, administrative and regulatory fronts on the lines of lead taken by RBI today. Lower crude oil prices will be one of the silver lining for India. We can also explore the idea of creating a crude oil strategic reserves by using forex reserves. We have been running relatively higher duration in anticipation of strong monetary measures. We expect yields to remain soft in the near term. These announcement will be taken positively by the equity market, however, its movements will continue to be dictated by the evolving situation on COVID-19 crisis and its implications on the economy and corporate profitability. 

 Mihir Vora, CIO Max Life Insurance
The RBI announcement of a hefty rate cut, liquidity measures, moratorium and other flexibilities announced for banks and NBFCs are welcome and necessary in these extraordinary times. The steps will ease some of the burden on the financial system and will aid to keep credit flowing to the economy. LTRO in corporate bonds eases “crowding out” of the private sector to some extent, thus creating an environment where large fiscal stimulus be absorbed by market with limited impact on yields. These moves thus create space for further targeted fiscal measures by the government. We believe given the gravity of the situation, further actions by RBI and the government are likely in the coming weeks. 

Abhishek Goenka, Founder & CEO, IFA Global
Like other major global central banks, RBI today went with emergency rate cut of 75 bps and reduced reverse repo by 90 basis points to make it unattractive for banks to park funds with RBI. Launch of Tltro upto 1 lakh crore, 1% reduction In CRR and raising MSF to inject more liquidity will be an additional boost to stimulate the economy. 

ALSO READ: RBI cuts repo rate by 75 basis points, allows 3-month moratorium on EMIs : Covid-19 crisis

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