New Delhi: Industry bodies and market experts on Friday complimented the Reserve Bank of India (RBI) on the decision to reduce repo rate by 75 basis points and introduce a host of other measures to boost liquidity the financial system on account of COVID-19 outbreak and the consequent lockdown.
“These steps will infuse fresh liquidity of Rs 3.74 lakh crore into the system by unleashing a staunch arsenal support,” said Niranjan Hiranandani, President of ASSOCHAM and National Real Estate Development Council (NAREDCO).
“In the crucial time when Indian economy is battling an exponential contagion, a fresh liquidity pumped in the system will certainly help to mitigate the stressed cash flow and debt pressure in the economic system,” he said in a statement.
Hiranandani said the reverse repo rate cut by 90 basis point now stands at 4 per cent now, which should compel banks to lend more to all the adversely hit sectors.
CII Director General Chandrajit Banerjee said the substantial reduction in cash reserve ratio will help banks to reduce their lending rates and aid monetary transmission.
“The increase in corridor between repo and reverse repo rates will discourage banks from parking money with the RBI,” he said.
Given that the current lockdown is expected to have a negative impact on the cash flows of companies, the moratorium on repayments of term loans for a period of thee months will help companies tide over this period.
“However, CII would urge that this period be extended further in case the impact of the virus outbreak lasts longer than expected,” said Banerjee adding the RBI governor did well to provide the assurance that all instruments are on the table to protect the economy and the financial system from either an excessive downturn or volatility.
