Additional Rs.5,000cr welcomed for HFC-NABARD
The ASSOCHAM expects the K.V. Kamath Committee to come up with liberal financial parameters and benchmarks for loan revamp eligibility.
FICCI also welcomed steps announced towards resolution of loans in the monetary policy by announcing the restructuring of MSME loans that were in standard category till 1 March 2020 and for setting up a committee under Kamath to work on resolution framework under June 7 circular.
“We keenly look forward to details and execution,” said FICCI welcoming the Reserve Bank of India (RBI) announcement on 6 August 2020.
Meanwhile, the ASSOCHAM described the RBI decision to keep the policy rates unchanged on expected lines, even as a continuance of the accommodative stance in the wake of the economic impact of the Covid-19 pandemic is welcome.
“The RBI has risen to the occasion by announcing a Restructuring Framework for the stressed borrowers, also helping lenders in the process.
“Maintaining the credit discipline, the RBI has notably not left discretions of financial parameters for eligibility to individual banks; by announcing a high-level committee for deciding the rules of the game,” it said.
“The banker of the high reputation of K V Kamath to be heading this committee gives great comfort and reassurance that the financial parameters would be non-discriminatory and liberal enough, taking into account the hardship being faced by the borrowers across the spectrum,” ASSOCHAM Secretary General Deepak Sood said.
ASSOCHAM has been consistently advocating for a liberal loan restructuring without compromising the credit discipline.
“We stand encouraged by the guidance being provided by the Central Bank amid the current environment of continued uncertainty. Weak demand has been the key pain point for businesses and all levers need to be used to get consumption back on track,” said FICCI President Sangita Reddy.
“Frontloading at least another 25bps cut in the repo rate would have been well-timed. The festive season has already set in and a cut in the repo rate would have given some guidance to businesses and consumers,” added Dr Reddy.
There has been a spurt in inflationary pressures. However, much of the stress in prices is on account of food led by lockdown induced supply-side distortions.
“Going ahead, as these constraints ease, the pressure on prices will subside and be back on RBI’s indicative trajectory,” she said.
“We also acknowledge the impact of liquidity measures listed out by the Governor in today’s statement. There has certainly been an improvement in the transmission of past rate cuts.
“However, the feedback we have received from the ground indicates that banks continue to remain risk-averse. We would urge the banks to extend a lending arm in letter and spirit.
“Given that a sense of uncertainty continues to prevail for businesses, a comforting approach by the banks at this juncture is extremely critical,” Dr Reddy stressed.
The review of the priority sector guidelines is applauded. The incentive framework laid out with the objective of minimizing regional disparities is a step in the right direction.
“We also welcome the broadening of the scope of priority sector lending to include start-ups and inclusion of solar power and compressed biogas plants under the renewable energy limits,” said Dr Reddy. In fact, FICCI had been asking for these inclusions for some time now.
Further, the announcements pertaining to an increase in the permissible loan to value ratio for loans against pledge of gold ornaments and jewelry for non-agricultural purposes from 75% to 90% is positive and will certainly ensure greater support to households, entrepreneurs and small businesses, said FICCI.
The additional liquidity window of Rs 5,000 crore each for the Housing Finance Companies and the NABARD should provide some relief to the stressed sectors, noted ASSOCHAM’s Sood.
Relaxation of the Loan-To-Value Ratio up to 90% for the gold loans is a great relief for the households who are facing severe liquidity crunch due to loss of income.
With the gold prices witnessing a sharp increase in the last few months, the households with precious assets can certainly get much higher loans against their gold pledges.
The inclusion of the Start-Ups in the Priority Sector would result in reduced cost of borrowing for the budding entrepreneurs, believes Sood. Likewise, further measures on the MSME debt restructuring are much -needed and welcome features of the RBI policy announcement.
He said, the policy goes much beyond tweaking of the policy rates and has dealt with some of the structural issues.
The RBI kept repo rate untouched at 4% and reverse repo rate at 3.35% amid a recent rise in retail consumer prices. This was much along expected lines, added property veteran, Anuj Puri, Chairman of ANAROCK Property Consultants.
The RBI was expected to do all it can to keep the inflation rates reined in for the duration, he pointed out.
Puri applauded RBI for announcing several additional measures that will go on to accelerate the economy, enhance liquidity, improve the flow of credit and deepen digital payment facilities, among others.
Commendably, its allotment of Rs.5,000 crore each to National Housing Bank and NABARD is a much-needed step for sectors including real estate reeling under the liquidity crisis.
It will help infuse capital into the HFCs and eventually provide relief to developers battling liquidity issues in COVID-19 times, said Puri. #housing #loans #credit #reporates #RBI #MSME #industry #ASSOCHAM #FICCI /fiinews.com
