MFIN: RBI addresses Industry’s concerns
The Reserve Bank of India has addressed industry’s concerns about the unbearable impact of coronavirus on the already feeble and fragile economy.
“Reserve Bank of India announced a big monetary bazooka including 75 bps repo rate cut along with massive liquidity injection (first CRR cut In 12 years!) and relaxation in various measures to address the existing and potential financial stress in the economy,” said Navneet Munot, ED & CIO, SBI Mutual Fund.
Measures targeted at giving relief to almost all borrowers to tide over these difficult times, relaxation on asset quality classification, capital adequacy, marginal standing facility and infusing massive liquidity to de-freeze the corporate bond and CP market will go a long way in easing financial stress.
With today’s (27 Mar) actions, total liquidity injection by RBI sums to 3.2% of GDP. 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 (27 Mar). 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,” said Munot.
“We have been running relatively higher duration in anticipation of strong monetary measures. We expect yields to remain soft in the near term.”
These announcements 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.
“As a house, our focus continues to remain on the bottom up stock picking,” said Munot.
The targeted long-term repo with a condition to invest in bonds and CPs of investment grade entities within fifteen days of availing the line would provide a much-needed relief in cooling down the corporate bond yields.
While there is no deferment of borrowings from the debt capital markets, the measures announced by the RBI will may make it easier for most companies to raise funding through fresh issuances.
Microfinance Sector applauds RBI’s measures
Industry association and RBI recognized self-regulatory organization, MFIN (Microfinance Institutions Network), has welcomed the measures announced by the RBI to minimize the impact of Covid 19 on the lives of 5.6 crore microfinance borrowers across India.
MFIN had made an industry representation earlier based on the anticipated impact of Covid 19.
Speaking on the measures announced on 27 Mar, MFIN Chairperson, Manoj Kumar Nambiar, said, “The industry concerns have been addressed with the back to back facility of three months moratorium on loan repayments beginning March to May 20 and measures taken to infuse additional liquidity in the country’s financial system.
“We appreciate the Government’s and the RBI’s wholehearted efforts to minimize the impact of Covid 19 through the economic package announced 27-28 Mar.
“We, in turn, will use this facility through our member entities to help our stressed borrowers. With our wide distribution network, we are gearing up to play a pivotal role in making credit available at the bottom of the pyramid where it is required the most,” he assured.
MFIN CEO Harsh Shrivastava said, “We work with the low income and excluded segments of our society; populations which are easily impacted by any crisis and have no safety nets. In acknowledging the need for credit to keep flowing to the stressed areas of the economy and in providing the right support, the RBI has boosted our industry’s confidence tremendously.”
The microfinance sector provides unsecured, small loans to the underserved segment of the society across 32 states in India. With a network of 40,000 branches and workforce of 3 lakh people having an enormous connect with over 5.6 crore Low Income Households (LIHs), the industry stands the closest to the LIHs to understand the impact, how they are coping and what they need most! In the wake of the virus outbreak, the industry has completely suspended all collections and disbursements.
The industry is using its long-standing customer connect to spread the awareness about Covid-19.
MFIN is a premier industry association comprising 56 NBFC-MFIs and 35 Associates including Banks, Small Finance Banks (SFBs) and NBFCs. It is also the Self-Regulatory Organization (SRO) for the regulated NBFC-MFI.
The comprehensive package announced by the RBI which includes a systemic liquidity enhancement of Rs.3.74 lakh crore and sharp cut in policy rates will provide support to the financial markets in the current uncertain and volatile period, said Karthik Srinivasan, Head-Financial Sector ratings, ICRA Ltd basis 27 Mar announcements by RBI.
The targeted long-term repo with a condition to invest in bonds and CPs of investment grade entities within fifteen days of availing the line would provide a much-needed relief in cooling down the corporate bond yields, he said.
While there is no deferment of borrowings from the debt capital markets, the measures announced by the RBI will may make it easier for most companies to raise funding through fresh issuances. fiinews.com
