Industry welcomes RBI’s measures for COVID-19 second wave

Indian industry has welcomed Reserve Bank of India’s new set of measures including Rs 50,000 crore liquidity boost to ramp up the COVID-19 related health infrastructure.

RBI announced the scheme which will enable banks to provide fresh lending support to a wide range of businesses including vaccine manufacturers, importers and suppliers of vaccines and priority medical devices, hospitals, pathology labs, makers and suppliers of oxygen, drugs and ventilators.

Reacting to the development, Harsh Vardhan Patodia, President, The Confederation of Real Estate Developers’ Association of India (CREDAI) said, “The announcements made by the RBI Governor today reflect that the Central Bank and Government are well aware of the impact of the second wave of the pandemic, shall proactively take measures to counter the economic fallout and take necessary steps in order to revive the economy. The Rs 50,000 Cr term liquidity facility to “Ease Access to Emergency Health Services” will come as a big relief to healthcare service providers, equipment manufacturers and patients alike. The Credit to MSME and Resolution Framework 2.0 for COVID related stress assets will provide a lifeline to many struggling individuals, entrepreneurs and enterprises.

 

Patodia said CREDAI expects similar measures which shall address concerns of large businesses and labour-intensive sectors like real estate will be announced in days to come. “We strongly believe that measures that make accounts classified as SMA 1 and SMA 2 also eligible for restructuring and interest moratorium coupled with additional liquidity under ECLGS 3.0 passed onto real estate projects will kick-start the engines of economy and job creation, which are most important to offset the effects of the second wave.”

He said it is high time that the Government considers reclassification of SMA across businesses as this would ease liquidity pressure on NBFCs and Banks. “The aftereffect of the second wave will last for a much longer period because of the exponentially large number of infections and deaths and the true impact is yet to be assessed. Hence, proactive measures, much larger than those announced during the first wave of the pandemic last year, are the need of the hour,” he added.

 

Dr. Samantak Das, Chief Economist and Head of Research & REIS, JLL India said the Resolution 2.0 measure by RBI will  provide relief to real estate linked SME stakeholders.

“RBI has proactively stepped in to address the financial challenges arising due to the second wave of the pandemic. The Central Bank has announced a COVID loan book to support those directly involved in addressing the pandemic (healthcare sector) with on-tap liquidity of INR 50,000 crore to banks. RBI has also recognised the hardships faced by individuals, small businesses and medium and small enterprises due to the lockdown and provided Resolution 2.0 measures for restructuring loans to small borrowers up to Rs 25 cr.”

“Other than individual borrowers, this will provide major relief to real estate linked SME players especially suppliers of input material for the sector. The working capital review will also help these stakeholders to tide over their liquidity issues as their cash flows have been partly impacted due to the recent lockdown restrictions in various states,” Dr Das said.

Anshuman Magazine, Chairman & CEO, India, South-East Asia, Middle East & Africa, CBRE said, “With today’s announcement, RBI focused on the revival of the Indian economy by adding adequate liquidity that ensures further stability of the overall market in the current scenario. The COVID loan scheme will boost economic activity and aid the growth of the MSME’s sector as well.”

“The announcement of restructuring of loans for small borrowers is a proactive move as it will provide some relief against asset downgrade and also provide relief to lenders. Liquidity support to the healthcare sector is also a commendable step. These decisions by the central bank to tackle the current situation are much appreciated and well-timed to ensure stability and economic revival,” he said.

Nitin Bhasin, Head of Research - Institutional Equities, Ambit, said, “RBI’s announcements today should be read in the context of their pro-activeness to allay any potential concerns around either MSME or MFI credit quality stress, as the 2nd wave of Covid has hit these segments. But we don’t find these to be such a big boost like last year’s announcements, especially the moratorium. To be fair, the RBI has already done the heavy-lifting last year by slashing rates to record lows and infusing a copious amount of liquidity in the system.”

 

“The problem today is of demand, as reflected in the very poor credit offtake, especially from the corporate sector, and these announcements will not have a very significant impact on the same, and hence the economy,” he said.

Naveen Kulkarni, Chief Investment Officer, Axis Securities, said, “RBI’s measures announced today have largely addressed the need of small borrowers, individuals as well as businesses, and MSMEs who have been amongst the worst affected in the second resurgence of Covid. Besides liquidity measures, easing lending to the above strata by extension of restructuring , boosting medical infrastructure through PSL recognition will help bring relief in the financial ecosystem. We believe small finance banks like Ujjivan, Equitas and MSME lenders such as DCB, City Union to benefit from some of these measures.”