Industry, market players and experts welcome Reserve Bank of India announcements

New Delhi: Announcements made by the Reserve Bank, particularly the one on resolution of loans, have been welcomed by the industry as well as market players and experts. The Reserve Bank of India (RBI) on Thursday announced a loan restructuring window for corporates following the demand from bankers and the industry. The restructuring will be allowed as per the prudential framework issued in June 2019, RBI Governor Shaktikanta Das said.

Last week, Finance Minister Nirmala Sitharaman had said that the government is working with the RBI on the need for restructuring of loans to help the industry tide over the impact of COVID-19.

Industry is encouraged by the RBI's decision to provide a window under the Prudential Framework to enable lenders to implement a resolution plan in respect of their corporate exposures, with the necessary caveats in place, the CII said in a statement.

CII President Uday Kotak also said that given that the RBI has already reduced the repo rate significantly leading to increased liquidity, the decision to "keep the rate unchanged at 4 per cent today is understandable".

Commenting on the monetary policy, FICCI President Sangita Reddy said the chamber congratulates steps announced towards resolution of loans in the monetary policy by announcing restructuring of MSME loans that were in standard category till March 1, 2020, and for setting up committee under K V Kamath to work on resolution framework.

"We keenly look forward to details and execution," Reddy said.

Secretary general of Assocham Deepak Sood said 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," he said.

He further said the banker of the high reputation of Kamath to be heading this committee gives a 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.

Relaxation of the Loan-To-Value Ratio up to 90 per cent for the gold loans is a great relief for the households who are facing severe liquidity crunch due to loss of income, Sood added.

D K Aggarwal, President, PHD Chamber of Commerce and Industry, appreciated the accommodative stance of the Reserve Bank of India in consideration of the recent developments at the global market and in the domestic economy.

"At this juncture, we urge the banking sector to percolate all the 115 bps cut in the repo rate by the RBI during the last four months for the benefit of trade, industry and consumers and for rejuvenating the demand in the economy," Aggarwal said.

On extension of the provision of restructuring of MSME loans, Apparel Export Promotion Council (AEPC) Chairman A Sakthivel said this is a very timely decision as thousands of small and medium enterprises are facing severe financial crisis and the extension of the provision will give a fresh lease of life to many," Dr A Sakthivel said.

Cyril Shroff, Managing Partner, Cyril Amarchand Mangaldas, said the RBI displayed a combination of courage and conviction; commercial expedience and calibration in their announcements on Thursday.

"These announcements will help rebuild resilience and stability in both the real and financial sectors," Shroff said and added, by permitting restructuring of loan accounts which were standard on March 1, 2020, RBI has restricted the relief to those viable businesses stressed on account of COVID 19 and therefore obviated any moral hazard concerns.

Divam Sharma, Founder, Green Portfolio said gold loan LTV raised to 90 per cent from current 75 per cent is a big positive for banks and NBFCs offering such loans and will give the SME and small business borrowers the much-needed liquidity in this unprecedented pandemic situation.

Sachin Chhabra, Founder and CEO of Peel Works, a B2B grocery e-commerce company, opined this was indeed the time for RBI to make some unpopular moves to turbocharge the economic revival process.

"We have an SME sector that is gasping for affordable capital, our supply chain systems are choked due to poor economics, and travel and hospitality are down and out. Firing up demand (cut back on interest rates) as we stabilise our supply systems, concurrently, is the only way we can return to our familiar old world," he said.

Naveen Kukreja- CEO and Co-Founder, Paisabazaar.com too appreciated the RBI's decision on increasing the LTV ration in gold loans.

Gold loans are backed by relatively liquid collaterals and hence, lenders take a more relaxed approach while sanctioning gold loans to those with poorer credit profiles, he said.

Kuntal Sur, Partner and Financial Risk and Regulation Leader, PwC India said, "Going by the market expectations", RBI is setting up an expert committee headed by KV Kamath for corporate and personal loans resolution plans.

Rumki Majumdar, Economist, Deloitte India, said the RBI's dynamic, proactive, and balanced approach is in line with our expectations that the central bank will be looking at alternate measures such as forward guidance and maintain sufficient liquidity.

Ishpreet Singh Gandhi, Founder & Managing Partner, Stride Ventures said under the new priority sector lending norms, startups will now be able to attract better pricing.

EEPC India Chairman Mahesh Desai said exporters continue to pay much higher cost of borrowing in India as compared to their competitors even as by RBI's own assessment, external demand is expected to remain 'anaemic'.