Politicians, Industry & Analysts Welcome RBI’s Stimulus Measures
“The announcements will improve liquidity, reduce cost of funds, help middle class and businesses,” Modi said.
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The RBI on Friday, 27 March, allowed banks to put on hold EMI payments on all term loans for three months and make the steepest cut the interest rate in more than 11 years as it joined the government’s efforts to rescue a slowing economy caught in coronavirus spiral.
The Reserve Bank of India (RBI) cut the repo to 4.4 per cent, the lowest in at least 15 years. It also reduced the cash reserve ratio (CRR) maintained by the banks for the first time in over seven years. CRR for all banks was cut by 100 basis points to release Rs 1.37 lakh crore across the banking system.
Soon after RBI Governor Shaktikanta Das announced the slew of measures, political leaders, industry leaders analysts were all unanimous in welcoming the announcement, saying that in these dire circumstances, the economy required this stimulus.
Prime Minister Narendra Modi took to Twitter to say the central bank has taken "giant steps to safeguard our economy from the impact of the coronavirus".
"The announcements will improve liquidity, reduce cost of funds, help middle class and businesses," he said in a tweet.
Earlier on Friday, the RBI governor had said in a press briefing, "The need of the hour is to do whatever is necessary to shield the domestic economy from the pandemic.”
According to Das, hopes of a shallow recovery in 2020 have been dashed and there is a rising probability that large parts of the world will slip into recession.
Finance Minister Nirmala Sitharaman too, thanked Shaktikanta Das for his words. She tweeted, “Appreciate @RBI@DasShaktikanta’s reassuring words on financial stability. The 3-month moratorium on payments of term loan instalments (EMI) & interest on working capital give much-desired relief. Slashed interest rate needs quick transmission.”
Commerce and Industry Minister Piyush Goyal said these decisions of the RBI would provide much-needed relief to people and businesses. “Welcoming RBI’s move to provide 3 months moratorium on payments of term loan instalments (EMI) & interest on working capital. Amidst this hour of need, this move has provided a much needed relief to people and businesses. #IndiaFightsCorona”, Goyal wrote on Twitter.
BJP President J P Nadda said the announcements would help the middle class and strengthen the economy.
Nadda tweeted, "Our Government is taking all necessary actions to help the citizens in this difficult time. Yesterday, Gov announced relief package. Today, in another important step RBI has taken many important decisions to give support and stability to Indian economy.”
Union Minister Prakash Javadekar too joined in to praise the measures taken by the RBI, tweeting, "@narendramodi government's historical decisions in succession. Three months moratorium on repayment of #EMI will help all home buyers, vehicle buyers and other customers. #IndiaFightsCorona #StayHomeStaySafe #RBIActs.”
"Steps announced by #RBI will reduce interest burden on businesses/industries and will boost economic activities," the minister said in another tweet.
The RBI’s measures come a day after the government unveiled a Rs 1.7 lakh crore package of free food grains and cash doles to the poor to deal with the economic impact of the unprecedented 21-day nationwide lockdown.
NITI Aayog Welcomes RBI's Move
NITI Aayog Vice Chairman Rajiv Kumar welcomed steps taken by the RBI, saying that the central bank's decision to cut key policy rates will lower cost of capital. "The RBI has taken exceptionally build measures to counter the -ve economic impact of CoronaVirus. By cutting the repo rate by 75 bps & the reverse repo by 90 basis points, it has lowered the cost of capital & also tried to ensure that banks will be incentivised to lend (sic)," Kumar said in a tweet.
"Deferment of debt repayment will also greatly reduce the cash flow crunch that businesses are facing. Kudos to the Governor, MPC and his team," he added.
PTI quoted NITI Aayog CEO Amitabh Kant as saying:
Industry Leaders Hail the Measures
Industry leaders too lauded the measures taken by the RBI in the wake of the coronavirus crisis.
FICCI President Sangita Reddy was quoted by PTI as saying,
PTI quoted Cyril Shroff, Managing Partner at Cyril Amarchand Mangaldas, as saying, "The RBI has unleashed a bazooka to deal with the economic pain and uncertainty prevailing in the wake of the COVID crisis. Acting swiftly and decisively, the RBI has used several levers to increase liquidity in the system".
CII Director General Chandrajit Banerjee, Assocham President Niranjan Hiranandani and PHD Chamber President DK Aggarwal were among other heads of industry who welcomed the move.
Analysts Approve the Move, But Some Want More
While most analysts welcomed RBI’s stimulus measures, some of them also said that the Reserve Bank of India (RBI) may have to deepen the rate cut if the COVID-19 crisis continues.
Kotak Mahindra Bank’s senior economist Upasana Bharadwaj was quoted by PTI as saying,
She said the measures should help in tiding over issues that many banks/institutions were fearing and will go a long way in cushioning the dislocations in various markets. The bank expects additional scope for 0.40-0.50 per cent cut depending on the nature of spread of COVID-19, she added.
"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." He said we need to explore unconventional measures on fiscal, administrative and regulatory fronts on the lines of lead taken by RBI," SBI Mutual Fund's Chief Investment officer Navneet Muhnot, as quoted by PTI.
Industry lobby CII’s director general Chandrajit Banerji welcomed the RBI’s moves but added that it expects the central bank to extend the repayment moratorium if the crisis worsens.
(With inputs from PTI)
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