RSS affiliate Swadeshi Jagran Manch (SJM) has welcomed the Reserve Bank of India (RBI)'s decision to push financial and lending institutions to extend more credit to businesses to deal with the economic disruption caused by the novel coronavirus (COVID-19) pandemic. "The steps are in the right direction, and may prove instrumental in tiding the pandemic's impact on our economy", the nationalist lobby group said.
In a statement, Ashwani Mahajan, national co-convener, SJM said that many of the RBI's moves like strengthening lending institutions and cutting down on reverse repo rate will allow banks and lending institutions to extend more debt rather than depositing funds with RBI or looking for expensive capital from the markets.
The group also agrees with RBI Governor Shaktikanta Das' assessment that the inflation trajectory is likely to fall below its target in next month or two. "This space, as Governor Das said, is required to be used effectively and at an appropriate time. We expect a further cut in the benchmark repo rates. This can actually flow more credit in the market and pent up demand", SJM said.
According to the group, RBI's decision to allow states to raise the Ways and Means Advances (WMA) by 600 bps is a welcome step. "This will help the states to gain access to liquidity to meet the expenditures in short term; without going to markets to borrow," they said, as a result, there will be no increase in the yields of the debt raised through existing bonds by states, which in turn will allow the states to retain capacity to raise more debt in the medium term, they explained.
SJM also welcomed RBI's clarification that the 90-day non-performing assets (NPAs) norm would not apply on moratorium granted on the existing loans by banks as well as other lending institutions. "This dispelled the fear of micro and small enterprises," they said.
On the Rs 50,000 crore Targeted Long-Term Repo Operation (TLTRO) 2.0, SJM said the operations will rush the fresh blood in the NBFCs, especially since 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 per cent to 3.75 per cent -- as 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 crore is a good step, especially when they were not able to raise fresh resources from the market. These funds can have a spiral impact on the economy," Mahajan said.