Policies will be tailored based on Covid-19 impact on economic activity of various businesses: RBI

Friday, July 17, 2020

New Delhi, 17th July 2020:
The Reserve Bank of India (RBI) will modify the policies based on the evolving situation in terms of the impact of Covid-19 to address various concerns of the industry, a top official said at an ASSOCHAM webinar held today.
“We need to see how the impact is going to be there on the economic activities of the various players going forward, and once we get a fix on this issue perhaps the policy responses could be appropriately tailored,” said Mr M. Rajeshwar Rao, executive director, Reserve Bank of India while sharing his perspective in an ASSOCHAM National E-Summit  on ‘Productive Use of financial resources to turbo-charge economic growth.’
He said that the immediate impact of the lockdown was in terms of the impact on the real sector as well as the financial markets. “The way the pandemic has spread out we have to play quite a bit by the ear, so the reactions and responses have been to the immediacy of the situation which we needed to handle. The first set of the responses essentially was to ensure that the markets continued to function.”
Mr Rao added that once the immediate priority of addressing the health issues is sorted out, the second step could be to ensure sustainability of existing businesses. “We need to approach stage-by-stage, so the first priority at this juncture is going to be the health and protection of the people, once we get certain degree of comfort on that aspect, the second segment will come into play.”
He further said, “Both the government and RBI would be open to whatever measures we need to take, I think the suggestions which come from the people as well as what are the requirements which we assess, I think those would be taken.”
He stated that the RBI governor and other officials are quite responsive and quite aware of the situation and they will really look at what is needed to be done and take an appropriate view on the matter.
The RBI executive director also said that the pandemic has brought dramatic changes in the economic scenario and going forward it may not be business as usual. “The challenge for the policymakers and authorities at this juncture is essentially three-fold - one is to address the health issues immediately, second would be to develop financial and economic measures to support the vulnerable and maintain conditions for a strong recovery and finally enable policies which would help us return to growth once the containment measures are lifted.”
He said that while the pandemic induced extreme uncertainty in financial markets, inflected high human and economic costs and has caused unparalleled demand destruction, the RBI, after the onset of the Covid-19, acted with unprecedented promptness by easing monetary policy through out of schedule MPC meetings and by injecting sufficient liquidity into the banking system.
“The policy repo rates which were lowered by 135 bps between February and December 2019 were further reduced by another 115 bps since March 2020 taking the cumulative rate cuts to about 250 bps and at four per cent, the policy rate is at one of its lowest ever levels,” said Mr Rao.
Earlier addressing the ASSOCHAM National E-Summit , Mr Dinesh Kumar Khara, managing director, State Bank of India (SBI) informed that the bank was very closely monitoring all such accounts where they have received the request for moratorium.
“We have gone on record and said that moratorium which we have received, in the personal loan we don't have much of a challenge, in the SME sector where we have received moratorium request, we are very closely monitoring what are their cash flows, what are the reasons their cash flows facing challenges and how we can really help them in tiding over this kind of a problem,” said Mr Khara.
He added, “So we are quite open to look at the request of MSMEs for the rehabilitation or restructuring also and I am quite hopeful that may be in the due course with the help of the regulator also we would be able to frame some kind of a scheme through which we can help the MSME sector who are in a real distress particularly when it comes to hotels, the kind of industries which have suffered the most they will probably need some kind of hand holding and we are quite open to look at them when it comes to restructuring, evaluating their cash flows.”
The SBI MD also said that going forward each of the bank has a task to make their own assessment to provide stability to the financial sector. “With RBI governor going on record stating that banks should look at the likelihood of losses and also try to recapitalize, so I think each of the bank should be making their own assessment depending on which they would be working out ways and means to raise their capital.”
In his address, Mr Sunil Mehta, chief executive, Indian Banks’ Association (IBA) lauded the efforts of the bankers and said, “Bankers have worked like Covid warriors as when industries were not working, bankers were going to their branches and catering to the masses and were unsung heroes facing challenges but providing uninterrupted services, nowhere banking services were stopped. We have the data, 98 per cent of the banking system was operating. It was providing services across the entire value chain be it ATMs, transaction banking, internet banking etc.”
He also said that ease of doing banking is one of the key agendas of the IBA. “We are of the opinion that banks will have to move their models to swifter deliveries, faster decision making. Same type of models can be scaled up and banks can design their own models where faster delivery can happen especially in retail and MSME segment. Most of the banks are already working on this line and developing products.”
Talking about the digitisation of banks’ loan products he said, “The process is on but it being transit phase it will take some time to build it up, so may be in six months from now you will find more of the digital lending products available in the market and it will facilitate ease of doing banking.”
Others who shared their views in the ASSOCHAM webinar included: Dr Charan Singh, chairman, ASSOCHAM National Council on Banking; Mr P.R. Seshadri, co-chairman;  Mr Pradeep Goel, CMD, Prudent Asset Reconstruction Company Ltd.; Mr Umesh Revankar, MD & CEO, Shriram Transport Finance Company Ltd.; Mr Shachindra Nath, executive chairman & MD, U-GRO Capital Ltd.; Mr S. Ramann, MD & CEO, National E-Governance Services Ltd; Mr S.C. Aggarwal, CMD, SMC Group; Mr Rajat Bahl, chief rating officer, Brickwork Ratings . and Ms Nipa Sheth, founder & director, Trust Group.
ASSOCHAM initiated its endeavour of value creation for Indian industry in 1920. It was established by promoter Chambers, representing all regions of India. Having in its fold over 400 Chambers and Trade Associations, and serving over 4.5 lakh members across India. ASSOCHAM has emerged as the fountainhead of Knowledge for Indian industry, which is all set to redefine the dynamics of growth and development in the Knowledge Based Economy. More information available on www.assocham.org
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