October 09, 2020
PHD Chamber welcomes status quo on the policy repo rate maintained by the RBI, urge banking sector for transmission of earlier repo rate cuts
Shri Sanjay Aggarwal, President, PHD Chamber of Commerce and Industry has welcomed the status quo maintained by the Reserve Bank of India for keeping the policy repo rate unchanged and continue with the accommodative stance as long as it is necessary to revive growth on a durable basis and to mitigate the daunting impact of COVID-19 on the trade and industry.
The Reserve Bank of India kept the policy repo rate unchanged at 4% while the reverse repo rate also remains unchanged at 3.35% and the marginal standing facility (MSF) rate and the Bank Rate at 4.25% in the third Monetary Policy Statement of 2020-21.
Though the recovery in high frequency economic indicators such as GST collections, IIP, Exports, Core Infra and PMI from their lows of April 2020 suggest an uptick and have started stabilizing in Q2 of 2020-21, increase in inflation expectations in the coming months due to the massive supply chain disruptions initiated during the nationwide lockdown period cannot be ruled out, said Shri Sanjay Aggarwal.
At this juncture, the calibrated decision of the RBI is highly appreciable and we look forward to that inflation remains within the target band as supply chain risks get mitigated by progressive easing of local lockdowns and removal of restrictions on inter-state movements, he said.
RBI’s announcement to conduct on-tap Targeted Long-term Repo Operations (TLTRO) with tenors of up to 3 years for a total amount of up to Rs 1 lakh crore at a floating rate linked to the policy repo rate is highly appreciable and would enable banks to conduct their operations smoothly without frictions while reviving economic and business sentiments across sectors having backward and forward linkages, said Shri Sanjay Aggarwal.
The decision to make Real-Time Gross Settlement (RTGS) system available on a 24x7x365 basis from December 2020 is highly encouraging and would result in providing wider payment flexibility to domestic businesses including MSMEs, added Shri Sanjay Aggarwal.
Several regulatory measures such as rationalization on risk weights for home loans, an increase of exposure limits to individual retail and small-sector business loans from Rs. 5 crore to Rs. 7.5 crore and extension of co-origination models to cover all NBFCs and HFCs would aid in speeding up the economic recovery process through the real estate sector and reduce the cost of credit to retail and MSMEs sector, thereby leading to improved flow of credit in the economy, said Shri. Sanjay Aggarwal
Although the real GDP growth rate decelerated sharply in Q1 in line with expectations, the worst is now behind us and we expect a healthy turnaround of economic recovery in the coming quarters on the back of several proactive structural reform measures announced by the Government and RBI during the last couple of months, added Shri Aggarwal.
At this juncture, we urge the banking sector to percolate all the 115 bps cut in the repo rate announced by the RBI during the recent months and help the economy rebound with rejuvenating the demand and GDP growth trajectory sooner than later, said Shri Sanjay Aggarwal.
PHD Chamber of Commerce and Industry