Welcoming the 40 basis points cut in the policy interest rates and extension of moratorium on loans across the board, the ASSOCHAM said with the RBI itself projecting a negative GDP growth, one-time debt restructuring on a wider scale is imperative.
“The RBI has been doing a lot of heavy lifting and making great efforts to infuse liquidity into the economy that has suffered an unprecedented crisis due to Covid 19. But as is clear from a huge reverse flow of liquidity into the RBI system by the banks, cash is reaching where it is needed the most,” Deepak Sood, secretary general of ASSOCHAM said.
Sood said reduction in interest rates is a great relief, but a new phenomenon is visible.
“Along with the risk aversion by the banks to lend, even the borrowers are apprehensive about increasing debts on their balance sheets in the face of a grave economic situation,” he said.
The downside risks to the economy are getting sharper, as recognised by the RBI Monetary Policy Committee, Sood said.
“Under such circumstances, restructuring of debts on a wider scale and a willingness to share the grave consequences of the global pandemic are essential,” he said.
The ASSOCHAM secretary general said the move to convert the interest under moratorium into term loans should ease the immediate stress of repayments.
Relief to exporters by way of increased credit availability along with pre-post shipment concessions would instil some level of confidence among them.
“However, exporters, with a large contribution from the MSMEs, too need a liberal restructuring of loans,” he said.
Sood said the livelihood concerns along with the health imperatives have to be addressed simultaneously.
“It goes to the credit of the RBI and the MPC that the crisis in the economy has been well-recognised, especially with regard to a huge dent to the private consumption and demand compression,” he said.
The supply chain disruptions are being addressed in a gradual manner as the economy re-opens in a phased manner.
Sood said the ASSOCHAM remains hopeful that both the RBI and the government would do more in the days and weeks to come to provide the much needed relief to the trade and industry.