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Below is the Views On Today`s Announcement Made by Reserve Bank Of India by Mr. Dhiraj Relli, MD & CEO, HDFC Securities
The RBI Governor unveiled measures to ease liquidity and bank credit, to support the economy and enable normal functioning of markets, as part of the economic relief to offset the fallout of coronavirus lockdown.
The RBI 's efforts are three pronged.
* Push Banks to do more lending (by cutting reverse repo rate), providing more liquidity to them (higher TLTRO-2 funds, special refinance facility of Rs.15000 cr to SIDBI and prescribing lower liquidity coverage ratio) and prescribing some reliefs and some fresh moves to create provisions against slippages.
* Provide more credit to NBFCs (especially smaller ones) by prescribing that atleast 50% of funds under TLTRO-2 must be on lend to such entities. The special refinance facilities of Rs.10000 cr to NHB will help housing finance companies avail more liquidity. Also NBFCs can grant relaxed NPA classification to their borrowers and NBFCs can extend realty loans by 1 year if projects delayed on reasons beyond control.
* Alleviate the woes faced by State Govts by increasing by 60% the States Ways & Means Advances (WMA) limit to provide greater comfort to states.
NBFCs are clear beneficiaries of these measures. For investors in Banks the provision of higher liquidity and relaxation in provisioning norms are welcome, but the bar on dividend distribution and new provisioning norms are negatives for the time being. While the RBI is doing its part in providing reliefs in the current times, the street could keep expecting more and there could also be some concern about the time it would take for these measures to have an impact at the ground level.
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