Monday, August 15th, 2022 21:21:30

SJM welcomes RBI’s measures to  overcome covid19’s impact on economy. 

Updated: April 18, 2020 7:19 pm

RSS affiliate Swadeshi Jagran Manch (SJM) welcomes the measures undertaken by the Reserve Bank of India (RBI). SJM believes that these steps are in right direction, and may prove instrumental in tiding the pandemic’s impact on our economy. The novel Corona virus, or Chinese virus has brought one of the worst crisis in the global economy, SJM believe that RBI’s move is well considered and would help the segments which would be opening up from April 20.

It says that RBI’s intent is to push the financial and lending institutions to extend the credit to the businesses of all sizes, especially small and micro ones. SJM believes that these institutions will make best use of these liquidity measures and pass on the benefits to the businesses to tide over the crisis created by Chinese Virus. Once the lockdown is lifted many businesses would require the debt as working capital, to restart the operational expenditure et al.

“SJM believes that many of the RBI’s moves like strengthening the lending institutions and cutting down of the reverse repo rate cuts will allow banks and lending institutions to extend more debt rather than depositing funds with RBI or looking or expensive capital from the markets,” it has added.

SJM says that It is fully aligned with the RBI Governor Shaktikanta Das’s assessment  that the inflation the inflation trajectory is likely to fall below its target in next month or two. This will create more policy space for it to better address the challenges posed by the Chinese Virus. This space, as Governor Das said, is required to be used effectively and at appropriate time. We do expect a further cut in the benchmark Repo rates. This can actually flow more credit in the market and pent up demand.

“RBI allowed states to raise the Ways and Means Advances (WMA) by 600 bps is a welcome step. This will not only help the states to gain access to liquidity to meet the expenditures in short term; without going to markets to borrow. Along with this, this will also not increase the yields of the debt raised through bonds.   This will allow the states to retain capacity to raise more debt in medium term,” SJM has further added.

While commenting on repo rate cut, it says that Rs 50,000 crore Targeted Long-Term Repo Operation TLTRO 2.0 operations will rush the fresh blood in the NBFCs, especially when half of this is targeted to the small and medium size NBFCs along with and Micro Finance Institutions (MFIs).  We also appreciate the cutting down of the reverse repo rate by 25 bps —from 4 percent to 3.75 percent—this will push the banks to extend more debt. The RBI’s special finance facilities for the NABARD, SIDBI and NHB worth Rs 50,000 Cr is a good step, especially when they were not able to raise fresh resources from the market. These funds can have spiral impact on the economy.

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