Reserve Bank of India (RBI) has come up with many relief measures!
The bank has reduced the policy repo rate under the liquidity adjustment facility (LAF) by 75 basis points to 4.40 per cent from 5.15 per cent with immediate effect.
The marginal standing facility (MSF) rate and the bank rate stand reduced from 5.40 per cent to 4.65 per cent from 5.40 per cent.
All commercial banks are being permitted to allow a moratorium of 3 months on payment of instalments in respect of all term loans outstanding as on 1 March 2020. Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, may be shifted across the board by 3 months.
Industry has also reacted positively on the measures. Tirupur Exporters Association (TEA) and Retailer Association of India (RAI) have welcomed the announcements.
Raja M. Shanmugam, President, TEA said, “The RBI governor has considered the major requisition and provided 3 months moratorium on payment instalments of term loan outstanding and interest on working capital facilities to be deferred by 3 months at this hour of crisis. We also appreciate the measures like deferment will not be classified as NPA.”
Dr. A. Sakthivel, Chairman, Apparel Export Promotion Council (AEPC) said, “We hope that the cut in the repo rate would translate into lower lending rates for both retail and corporate credit, and would thus encourage consumption and investment. The three-month moratorium on EMIs on all outstanding loans comes as a big relief for both corporates and individuals. However, to help the apparel export industry, more needs to be done.”
The industry also is of the view that there should be no penalty on advance forex booking and postponement of EMIs by 6 months to start with. The Government should advise the banks to delay declaring the company’s accounts as NPAs for one year due to the economic fallout. This industry needs immediate relief in terms of faster clearance of banking and packing credit, a late realisation of export bills and raising of advance limit to 25 per cent without any collateral to ease working capital constraints.
Welcoming all steps Ashwin Chandran, Chairman, The Southern India Mills’ Association (SIMA) also appealed to the Prime Minister to advise RBI and banks to give clear instructions to provide additional working capital to the tune of 25 per cent without any additional collateral or margin money.
“We also urged to Prime Minister to advise RBI to issue clear direction immediately for extending the moratorium for the payment of interest on term loans as the March 2020 quarter is fast approaching,” he added.
Thanking the RBI Governor, RAI said, “We had asked for moratorium, ease of loan classification, interest rate cut and deferment and you have paved the way.”
In respect of working capital facilities sanctioned in the form of cash credit/overdraft, the banks may recalculate drawing power by reducing margins and/or by reassessing the working capital cycle for the borrowers.
The RBI also said that the global economic activity has come to a near standstill as COVID-19-related lockdowns and social distancing are imposed across affected countries. Expectations of a shallow recovery in 2020 from 2019’s decade low global growth have been dashed.
