Expert decodes RBI liquidity measures amid second wave crisis – check details here

Mentioning that the Reserve Bank of India is ahead of the curve, the banking and market expert Ajay Bagga hailed the liquidity measures that have been announced by the RBI Governor Shaktikanta Das on Wednesday morning amid the second wave of coronavirus being widespread. 

Rolling out a slew of measures especially for healthcare infrastructure, small finance banks among others, the RBI Governor said that the second wave of COVID-19 in India has drastically altered the economic situation and the RBI will continue to monitor the emerging situation, using all resources. 

See Zee Business Live TV Streaming Below:

Explaining how these measures would help the banking sector specifically, Bagga said - Under covid loan book, banks would get money for three years on repo rate and the amount of the money banks would lend on 40 basis points, which is higher than the normal reverse repo rate. 

Bagga explains further, this would come into priority sector book too, as foreign and private banks, which gets less opportunity to make priority sector book, they can now purchase assets from NBFCs. 

मार्केट एक्सपर्ट अजय बग्गा से समझिए RBI गवर्नर के ऐलानों की तमाम बारीकियां#RBI #ShaktikantaDas @AnilSinghvi_ @Ajay_Bagga pic.twitter.com/qfa9o7gfgG

— Zee Business (@ZeeBusiness) May 5, 2021

He terms, this would really help them to make a priority sector book and would get takers too. 

While speaking on SLTRO (Short targeted long-term repo operation) which is not extended for SFBs, (small financing banks and MFIs (micro-financing institutions) Bagga says both will have more liquidity and MFIs lending from SFBs, even they have been brought in priority sector. 

He terms MSME (micro, small and medium enterprises) loan deductions as a positive move by the RBI. The RBI has reopened one-time restructuring for individuals, MSMEs. They will be permitted one-time restructuring till Sept 30, 2021. 

This move will certainly help the banking heavyweights such as HDFC Bank and Axis Bank, which has lately disclosed that they are increasing the SME loan book. 

Similarly, the resolution framework 2.0 laid out by the RBI is also hailed by the market expert, He says, this it will provide protection to bank and time to clients, so that they could restructure the loan. 

He points out the time frame given for the resolution framework is huge, and then it shall be implemented till December 31, 2021. 

Under the video KYC (Know Your Customer) norm, the RBI has decided to penalise no individual for the next six-seven months failing to do KYC and has also urged banks to undertake a video KYC. This is an important step for the safety of banking professionals who are still going to work and ensuring each customer is done his/her KYC, the market expert says. 

He praised the RBI’s decision on countercyclical provisioning buffer held by the bank as of December 31, 2020, for making specific provision for NPAs (non-performing assets) up to March 31, 2022.