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Below is the Views On RBI Monetary Policy By Mr. Piyush Baranwal – Executive Vice President - Senior Fund Manager (Fixed Income), YES AMC.
Two of the issues currently plaguing Indian financial markets are credit squeeze and muted monetary transmission to bulk of the other-than-prime borrowers hit by current demand slowdown or GoI’s push towards more formalization of the economy. RBI’s attempt to focus on these issues rather than doing more of the same in the form of repo rate cuts, which was anyways not helping the economy enough, is a very welcome move.
Removal of CRR requirement on incremental credit to retail loans for automobiles, residential housing and loans to MSMEs, extension of one-time restructuring scheme for MSME advances and 1-year extension allowed for date of commencement of commercial operations of project loans to commercial real estate should all help alleviate funding woes of these crucial segments of the economy. Similarly, LTROs, new floating rate loans allowed for Medium Enterprises and CRR forbearance on incremental credit to retail loans for automobiles, residential housing and loans to MSMEs should improve monetary transmission to crucial industry segments which are currently struggling. Overall, today’s policy should hopefully help start the virtuous cycle to pull Indian economy out of its current morass.
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