Chennai: India Inc has said the Reserve Bank’s surprise move to slash key interest rates will provide a much-needed respite to small businesses and also revive demand.
The industry said more support will be required on an ongoing basis both from the RBI and government to stimulate economic growth amid the Covid-19 pandemic.
The Reserve Bank unexpectedly slashed benchmark interest rates to their lowest levels since 2000 and extended the moratorium on repayment of loans for three months to ramp up support for the economy which is likely to contract for the first time in over four decades.
The benchmark repurchase (repo) rate was cut by 40 basis points to 4 per cent, the lowest since the benchmark came into being in 2000, Governor Shaktikanta Das said.
CII director general Chandrajit Banerjee said the RBI should also consider extending this moratorium to NBFCs for their repayment to banks, without which the NBFCs sector is facing acute distress.
“Another move the RBI should consider is to allow one-time restructuring of loans to relieve stressed businesses. Group exposure limit for lenders to corporates to 30 per cent from 25 per cent is a welcome move too, as it is expected to help banks meet the borrowing requirements of the private sector,” Banerjee stated.
FICCI president Sangita Reddy said, “With the outlook for economic growth being very uncertain and RBI itself admitting that GDP growth in the current fiscal will be negative, Ficci feels that more support will be required on an ongoing basis both from RBI and government and we shall remain engaged and keep providing feedback on behalf of Indian industry to the policymakers and regulator.”
Anshuman Magazine, chairman and CEO – India, South East Asia, Middle East and Africa, CBRE, said, “the RBI’s move to cut repo rate by 0.4 basis points will have a positive effect on the residential property market. This is a clear step towards reducing lending rates, encouraging liquidity, preserving financial stability and supporting overall economic growth. The reduction in reverse repo rate will encourage banks to lend more and extension of moratorium on EMIs on term loans by another six months and steps to ease cashflow burden on borrowers will improve overall sentiments and market performance.”