RBI Monetary Policy: Shaktikanta Das says closely monitoring NBFCs, HFCs - Here's how they reacted
In the briefing, Das also explained that, RBI is mandated to look after financial stability in economy.
The NBFC sector remained the key focused area during RBI's second bi-monthly monetary policy. When asked questions about NBFC crisis in the press briefing, Governor Shaktikanta Das stated that, RBI have been closely monitoring development in the NBFC sector including housing finance companies (HFC). He also mentioned that, RBI does not regulate HFCs, but banks do have exposure in this segment.
Talking about RBI's second bi-monthly monetary policy Umesh Revankar, MD and CEO - Shriram Transport Finance Ltd said, "25 bps cut by the RBI is the third consecutive cut in 2019. The transmission of the previous rate cuts had been very discouraging at only 5-10 bps."
Revankar hoped for 50 basis point cut in latest monetary policy. He said, "As the monsoon predication is very positive, we expected RBI to take a bolder step and do 50 bps rates cut, that would have given clear signal to India Inc to push for growth and take investment decisions thereby maintaining the capex cycle."
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On NBFCs, Revankar explained that because of higher interest rates the consumer spending like auto sales, real estate etc. has been very weak. "We urge RBI to open up funding to retail NBFCs through banks that will stimulate the consumer spending," he said.
On the other hand, Khushru Jijina, MD, Piramal Capital and Housing Finance said, "NBFCs are instrumental in providing credit to MSMEs and real estate sectors, that are significant to India’s GDP. MSMEs contribute 31% of the GDP, 40% of exports and hires 25% of the labour force while real estate contributes more than 5% to GDP and hires 17% of the labour force directly or indirectly."
"The credit crunch in the NBFC sector has witnessed a corresponding decline in manufacturing and construction activities in the last two quarters of 2018-19. We anticipate more decisive and pro-active policy measures to address the current liquidity crisis, that will enable NBFCs to restore lending activities, especially to these critical sectors," Jijina said.
In the briefing, Das also explained that, RBI is mandated to look after financial stability in economy. Hence, they will ensure that there's a robust, well-functioning NBFC sector.
Das assured NBFCs that RBI won't hesistate to take whatever measures required for ensuring financial stability.