Goodwill Investor Education Eagle’s Eyes – Stock Market Review.

“A Doctor’s Prescription for ailing Indian Economic Health”.

The Economic Doctor’s prescription for revival: We mean RBI Governor:

Reserve Bank of India Governor Shaktikanta Das today unfolded a slew of prescription for reviving the ailing Indian Economic health.

He put forward ” to-do list” for the RBI to bolster the economic fight against Covid-19. At the policy meet Das said the RBI would be maintaining the repo rate at 4% and an accommodative stance for the economy. All other rates also remain same.

Herein below, are some of the key takeaways from the MPC meet:

Relief for businesses and borrowers
– A window under the June 7 stressed asset resolution framework will be provided which will enable lenders to implement a resolution plan, without a change in ownership.
– RBI will also constitute a committee under Mr.K.V Kamath on required financial parameters to be factored into resolution plan.
A lifeline for small and medium firms
– Stressed MSME borrowers will be eligible for restructuring their debt under the existing framework provided their accounts were standard as of March 1, 2020.
– This restructuring will have to be implemented by March 31, 2021
This will provide further relief to MSMEs as the pandemic continues to disrupt normal functioning and cash flow
Borrow more against gold jewelry
– Loan-to-Value for loans sanctioned by banks against pledge of gold for non-agri purposes increased  from 90 %.
– Relaxation available till March 31, 2021.
This will allow households to borrow more against existing gold holding than before with the spiraling Gold rates. Households will be able to get more funds by taking a loan and not be forced to sell it to get more liquidity.
More money for real estate
– National Housing Bank (NHB) to get Rs 5,000 crore to shield the housing sector from liquidity disruption, augment the flow of finance.
– NABARD to get Rs 5,000 crore to ameliorate stress faced by small NBFCs and MFIs.
Flexibility for banks
– The Reserve Bank  to introduce an optional facility to provide banks more flexibility/discretion to manage their day-end cash reserve ratio balances.
– Banks will now be able to set the amount that they want to keep as balance in their current account with RBI at the end of the day.
Other announcements
– An innovation hub will be set up in India to promote and incentivize Start-ups.
– A mechanism of positive pay for all cheques above Rs 50,000 to be introduced.
– A scheme of offload retail payments using cards and mobile devices and a system of -online dispute resolution mechanism or digital payments will also be introduced. —— Inflation may go up in the next Quarter..More reforms are needed and the present one inadequate.  Banks should raise Capital as stressed assets also may go up. The Liquidity should raise the demand and consumption.

These measures announced by RBI will impact the markets positively as MSME and others will get some relief and  the cost of funds being the lowest, the firms may concentrate on procuring orders and execute them to improve their revenue.

Thus the markets will see some positive emergence of investments.

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