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RBI's Relief Measures Garner Mixed Reactions

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RBI's Relief Measures Garner Mixed Reactions
Vishav - 22 May 2020

New Delhi: As the RBI on Friday cut its repo rate by 40 basis points to 4 per cent and also extended the loan EMI moratorium by another three months, the real estate industry insiders had mixed reaction with some calling it a big relief for several Indians while others called it a short term piecemeal solution to a long term problem.

Satish Magar, President, CREDAI National, said the industry expected more stringent measures from the RBI considering that real estate sector can act as a catalyst in resurrecting the economy, backed by stringent fiscal and non-fiscal measures.

"The move of moratorium extension is a short term piecemeal solution to a long term problem. The interest rate should be reduced with firm liquidity measures as this is the need of the hour backed by one-time restructuring of loans to help the real estate sector from crumpling," he said.

Magar added that while the RBI has tried to ease the pressure on borrowers and has extended group exposure limit for lenders to corporates from 25 per cent to 30 per cent, this was not enough to solve the ongoing liquidity crisis.

"Government now needs to ensure that banks are forthcoming and are passing on the benefits to us. Real estate industry remains the second largest employer after agriculture and prolonged slowdown in the sector will have a direct impact on survival of 269 allied industries. Hence, it is critical for the government and RBI to take immediate measures to provide economic relief," he said.

According to Emkay Global Financial Services, the EMI moratorium was a major negative for all NBFCs as this would further delay the overall collection and recovery procedure, and stretch the total liquidity cycle for all.

"In addition, this would further damage financial discipline, especially for small-ticket borrowers and MFIs," it said.

Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com, however welcomed the decision to further reduce the repo rate to 4 per cent and said it would not only help developers but also homebuyers who have been under extreme pressure due to the prolonged lockdown which has impacted their income.

"This along with the move of extending loan moratorium for another three months will be extremely helpful in lowering the burden for those who are paying EMIs or using credit cards and lower financial stress. What needs to be seen is how quickly the banks reflect this change in their respective rates," he said.
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