Commenting on the series of measures announced by the RBI, Dr Sangita Reddy, President, FICCI said, "The measures announced today by the Governor are welcome and add to the continuous interventions that are needed in times such as these. The cut in the policy repo rate by RBI by another 40 basis points should enable banks to cut the lending rates further and we hope that the transmission is quick and to the full extent including for the rate cuts that were introduced even earlier.
Besides the cut in the repo rate, we are happy to note that RBI has extended the period for moratorium on loan and interest payments by another three months till August 2020. This was a point highlighted by FICCI as we feel that given the significant disruption in the economic activity levels in the country and globally, the initial three-month moratorium period was certainly not sufficient for providing a cushion to our companies. We hope that as we move ahead in time, RBI will remain open to further extensions if the situation warrants."
"While the extension of the moratorium period to six months is a positive move, FICCI is also happy to note that RBI has allowed accumulated interest over the moratorium period to be converted into a Funded Interest Term Loan.
FICCI had asked for this as it would have been difficult for companies to make the payment of accumulated interest soon after the moratorium period was over.
Of course, passing of the intended benefits of this and other related measures will be contingent on swift action on part of the banks and we hope that the announcements will be implemented in full letter and spirit by them," Dr Reddy added.
"The relaxation in the group exposure norms for banks from 25% to 30% is another positive in today's announcements and should help some of the larger corporates that were hitting this target in terms of their bank financing limits," said Dr Reddy.
"While the above measures are well taken, FICCI would once again urge RBI to permit banks to do one-time restructuring of loans for companies with the right to recompense later. This is critical if we have to avoid seeing a collapse of businesses across sectors and sizes.
Additionally, there is imperative need to provide for a COVID liquidity bridge to support restructuring/ additional loan requirement of large companies whose balance sheets have got impaired due to COVID. This will have a huge positive impact on the entire supply chain of these companies including many small and mid-sized vendors, which otherwise may not survive the current crisis," she said.
"Finally, we would also like to see a special package being announced for some of the most battered sectors of the economy such as airlines, airport developers, hospitality and tourism, retail and healthcare sector, which have seen a sizable demand destruction and for whom recovery is a distant horizon. 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," added Dr Reddy.