Experts welcome RBI measures to stimulate economy and improve money supply

“Measures such as the extension of the DCCO for real estate, the extension of the MSME window for restructuring and the exemption of the CRR for additional financing of key segments are growth-oriented and promise to provide momentum. essential for bank loans, ”said Das.

Economists and financial experts hailed the RBI’s widely awaited status quo on the repo rate and other announcements aimed at stimulating economic growth and effectively securing the money supply.

The RBI on Thursday kept its key rate unchanged at 5.15%. This follows a cumulative decline of 135 basis points (bps) in the repo rate from February to December 2019.

The six-member Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, unanimously decided to keep the repo rate unchanged.

Bank of India CMD AK Das called the RBI policy quite progressive and forward thinking.

“Despite the unchanged policy rates, the introduction of Term Repo opens up ways to transmit signal rate changes,” he said.

“Measures such as the extension of the DCCO for real estate, the extension of the MSME window for restructuring and the exemption of the CRR for additional financing of key segments are growth-oriented and promise to provide momentum. essential for bank loans, ”said Das.

According to Rajni Thakur, economist, RBL Bank, MPC’s decision was in line with expectations.

“The changes in development and regulatory policies, however, were a positive surprise and could potentially prove to be an important support to struggling sectors of the economy,” Thakur said.

Specific announcements in terms of CRR relief or long-term sustainable liquidity for banks are pushing the overall availability of credit in the financial system. Whether these measures succeed in improving demand conditions is another question as a whole, she added.

The RBI announced one-year and three-year term (repos) repurchase agreements of appropriate sizes for a total amount of Rs 1 lakh crore at the policy’s repo rate, starting in the fortnight. starting February 15th.

“It is an effort to ensure better transmission of monetary policy. This will allow banks to reduce their lending rates, ”RBI Governor Das told reporters at the post-policy conference.

Upasna Bhardwaj, Economist, Kotak Mahindra Bank quite rightly said that MPC has responded to growth challenges by pushing transmission by fine-tuning the liquidity framework, providing long-term liquidity operations and inducing credit to certain sectors.

“We expect these moves to ease the pass-through as the shorter end of the yield curve is expected to recover significantly. These measures should promote the availability of funds at lower cost and help struggling sectors, ”said Bhardwaj.

ICRA economist Aditi Nayar said: “The tone of the MPC’s statement was rather conciliatory, especially given the reiteration that there is political room for maneuver available for future action.

“The accommodative stance will be maintained for as long as necessary to revive growth, despite headline inflation having passed the upper threshold of the MPC’s medium-term target.”

The RBI also raised the projection of retail price inflation for the last quarter of this fiscal year to 6.5%, citing high input costs for milk and pulses in addition to higher oil prices. gross in a context of growing geopolitical tensions.

Mr Nayar said the statement suggests the virtual certainty of at least one more rate cut, albeit a modest magnitude, the timing of which will depend on how quickly inflation appears to return to 4%.

Umesh Revankar, MD and CEO – Shriram Transport Finance said the eye-catching aspect of the policy is a marginal improvement in the IIP, Manufacturing Index (PMI) and Services Index.

These figures illustrate the start of growing activity although still under waiting and radar surveillance to bring any further excitement, he said.

“We believe that all the political decisions as well as the pro-consumer budget corroborate that there would be better demand on the consumer side. Once that increases, there will automatically be better demand for credit, ”Revankar said.

The expansionary stance of monetary policy was necessary and provides an assurance that there will not be a reversal of easing and that the RBI will not hike rates immediately, said Rumki Majumdar, economist, Deloitte India. .

The Chairman of the Engineering Exports and Promotion Council (EEPC), Ravi Sehgal, said the RBI measures to provide a single restructuring window for advances to MSMEs would help resumption of growth in employment-oriented sectors.

MSMEs contribute significantly to the country’s exports.

“While global markets are sluggish, exporters, especially those of SMEs, face challenges. RBI measures through restructuring loans and providing CRR incentives to banks to lend to MSMEs would certainly help the export sector, ”he said.

Plentiful liquidity with banks should lead to lower interest rates as part of an effective transmission of past cuts, he added.

Anarock Property Consultants chairman Anuj Puri said the one-year extension of the project loan restructuring is a major relief for the real estate industry.

It complements many of the government’s previous initiatives in 2019.

“Loans for projects that have been delayed for reasons beyond the control of their promoters have been extended for one year without downgrading the classification of assets. This is a big step forward that will bring the much needed relief to the cash-strapped real estate industry – as well as developers and HFCs from a liquidity perspective, ”Puri said. PTI KPM KPM ANU ANU 02061509

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