Cong terms RBI measures 'too little, disappointing'; seeks sector-specific packages

In the string of measures announced on Friday, the RBI has 'again missed the bus" in fuelling demand in the economy hit by the coronavirus outbreak and its response is "too little and disappointing", the Congress said as it sought sector-specific packages from Prime Minister Narendra Modi.

Congress chief spokesperson Randeep Surjewala said the pandemic has reached disturbing proportions and the consequent lockdown has completely rendered businesses to a standstill.

"The RBI in its COVID19 stimulus 2.0 package has again missed the bus in the need to fuel demand.

"Instead of addressing demand, which typically involves putting money into the hands of the people, RBI has decided to increase liquidity of the banks, to lend more at a lower interest rate," he said in a statement.

Unfortunately, he said, in a system that is grappling with fear, this type of prodding to lend will not yield much result.

Congress senior spokesperson Anand Sharma said the measures announced by the RBI are far too little to meet the needs of the Indian industry and prevent the MSMEs from sliding into ICU.

"Urging the Prime Minister once again to announce sector specific packages to ensure companies remain afloat," he said on Twitter.

He said the government guaranteed bank finance to MSMEs at 0 per cent interest, interest subvention and affordable credit for the industry.

"Moratorium on instalments will not be enough, complete waiver of interest for 180 days and rescheduling of NPAs up to September 1, 2020 is the way forward, he said.

Congress leader Ajay Maken expressed disappointment over the announcements made by the RBI, saying the government should take more measures to mitigate the problems of those suffering due to the coronavirus-induced lockdown.

"The announcements made by the RBI have no meaning. The Congress and people are disappointed with the announcements. The government should take more measures to mitigate the problems of the poor and the vulnerable," he said at a press conference through video conferencing.

Surjewala said the confusing part of RBI action is the fact that the central bank also wants the banks to continue to maintain capital and also wants a safety net in the form of additional provisions. It, however, does not state in as much words that the situation does not warrant increased lending, while most of the actions of RBI is indicating the same, he noted.

The Congress leader said the NBFC industry has been seeking relaxation of NPA classification as they sense both the negative trend in the economy as well as the pandemic would hit their target audience -- the MSME sector and the realty sector.

"Allowing certain NBFCs to extend loan terms to the realty industry customers is a welcome sign but with the realty sector likely to be hit the most, whether this will help is a big question," he said.

The Congress leader said the RBI is focusing on increased liquidity to the banking and financial institutions, but they are not facing the problem of money, but risk appetite.

He said what did not happen during the 2017-2019 period of economic slowdown is being attempted during this pandemic.

Surjewala said when demand for goods and services have crumbled and likely to remain benign more on account of fear than on account of lack of opportunities, instead of focusing on how to fuel the economy with demand, the RBI is focusing on increasing liquidity.

The RBI not providing growth guidance is a clear indication of difficult times which call for RBI knocking the doors of the government for fiscal action rather than being prodded for monetary action, he noted.

The RBI providing liquidity measures to states while being a welcome sign, is again misleading because these are short term loans and whether the states can repay these loans is a big question mark, he said.

States, he said, are not in a position to generate revenue due to complete stand still situation which theLockdown has pushed the economy into.

RBI Governor Shaktikanta Das announced a string of relief measures for the stressed banking and financial sector, cutting the reverse repo rate by 25 basis points (bps) to 3.75 per cent but keeping the repo rate unchanged.