In an unscheduled address on Wednesday, May 5, Reserve Bank of India (RBI) Governor Shaktikanta Das announced several set of measures to tackle the economic disruptions amid the second wave of the COVID-19 pandemic in the country. The central bank will provide term-liquidity support of Rs 50,000 crore to ease the access of funds for emergency medical services. This comes at a time when the healthcare system is overburdened with surging coronavirus cases. (Also Read: RBI Announces Term Liquidity Facility Of ₹ 50,000 Crore For Healthcare
The RBI also re-opened its one-time loan restructuring plan for individuals, small businesses, and micro, small and medium enterprises (MSMEs) currently affected by the state-wise lockdown restrictions. The small borrowers having exposure up to Rs 25 crore, who did not avail of the restructuring earlier and where loans were classified as standard as of March 31, 2021, will now be eligible for loan restructuring in the second round. (Also Read: RBI Says Loan Moratorium for Small Borrowers – See Who Qualifies )
The Reserve Bank also relaxed KYC norms for customers and directed the regulated entities or banks not to impose any restrictions in case the account holders failed to update their KYC till the end of the year. The RBI also extended the scope of the video KYC or V-CIP for the new categories of customers including proprietorship firms, authorized signatories, and beneficial owners of legal entities. (AlsoRead: RBI Relaxes KYC Norms Till End Of Year: Here’s What Customers Should Know )
Here’s what analysts and experts have to say on the RBI’s announcements today, as part of its measures to tackle the economic disruption:
Mr. Dhiraj Relli, MD and CEO, HDFC Securities:
“The RBI Governor’s announcement did not include blanket moratorium and hence some of these fears did not come out to be true and Banking stocks did not sell-off. Small businesses and MSME borrowers have been given a chance to extend their payment schedules. Rs.50000 crore term liquidity for healthcare sector is welcome but unlikely to benefit many listed players. Overall the street may be disappointed with the financial impact of the announcement. ”
Dr. Joseph Thomas, Head of Research, Emkay Wealth Management:
“The three-year facility, which the banks can advance, to the of Rs. 50,000 Crs, is a good measure to immediately help ramp up medical and healthcare facilities. The benefits of this will help increase capacity for the longer term as it covers diagnostic, preventive as well as combative aspects of healthcare.
Omkar Shirhatti – Co-Founder and CEO – Karza Technologies:
“The rationalization of KYC compliance norms announced by RBI today was a much-needed move and is likely to impact the banking ecosystem in multiple ways. The most significant impact we foresee is a relatively substantial reduction not just in customer acquisition costs but also in operations and compliance costs. A large chunk of operational and compliance costs came from the regular updation of KYC information, something which may now be possible via mobile and internet banking by customers themselves, thus reducing those costs.
From the customer perspective, businesses and commercial entities have had to go through paper-based account opening thus far. With the change in norms, current account openings and MSME Lending can now be completely digital, giving small businesses easier access to banking facilities. We also foresee an increase in Neo Banks and Digital SME Banks. On the whole, the new norms are a move in the right direction, enabling more thorough digitization and a secure banking ecosystem. ”
Shekhar Bhandari, President –Global Transaction Banking, Kotak Mahindra Bank:
“RBI’s measures announced towards rationalization of KYC norms, especially extending scope of V-CIP, will enable banks to step up customer on boarding, as also enhance customer experience. Credit to MSMEs will increase given the relaxation announced for NDTL.
Ms. Bekxy Kuriakose, Head – Fixed Income, Principal Asset Management Company:
” Considering the big bang measures taken by RBI since March 2020, today’s measures are more of incremental specific targeted measures designed to provide relief where required.
For the debt market, the announcement of Rs 35,000 cr of OMO purchases under Gsap 1.0 or Government Securities Acquisition Program was a key positive which led to the 10-year benchmark gilt closing below six per cent today. While totally quantum under Gsap 1.0 has already been announced for the quarter April to June 2021, considering RBI’s reiteration today that policy would be channeled to targeting growth impulses market has taken announcements positively.
We expect in the near term gilt prices to remain supported given RBI measures in the backdrop of banking system liquidity and benign short-term money market rates. ”
Mr. Nish Bhatt, Founder & CEO, Millwood Kane International – an investment consulting firm:
“The measures announced will support the funding requirements of the healthcare, medical facilities, beef-up vaccine manufacturing for domestic inoculation. MSMEs and individuals borrowers will benefit from the extension in the moratorium. The RBI’s intent to take further measures if need to be provided relief, focus on the post-COVID future will send the right signal for the markets .. ”
Mr. Vikash Khandelwal, CEO, Eqaro Surety Private Limited
” Maintaining its stance of providing monetary support, the RBI Governor announced measures to support healthcare infrastructure, protecting the interests of small businesses, individual borrowers, and safeguarding the macro-economic fundamentals. The step to categorize small finance banks’ on-lending to Micro Finance Institutions (MFIs) as priority sector lending will ensure liquidity for small businesses. ”