Quick take the RBI COVID Steps

Great policy measures today....but much more needed from both RBI and Govt on the economic measures required

1. Reverse repo rate cut by 90 bps which now becomes the indicate policy rate and not the usual repo rate cut by 75 bps
2. Will await the circular to see how much forebearnace ( 3 month moratorium both principal and interest ) has been given for loans at the retail level : whether it includes educational loans, etc.Term loans have been mentioned so credit card loans will not qualify
3. The moratorium is only for a 3 months deferral of interest and loan repayment ( EMI ) : it is NOT a waiver of interest. Thus employyes with EMI who face jobs losses will find this too helpful.
4. Holding corporate bonds to HTM rather than MTM is very psoitive for corporate bond market and will lead to a crash in yields of high grade paper like HDFC
5. CRR cut : monies released to be invested / deployed either in bond markets or loans, This is an excellent move to prevent banks from just sitting on extra liquidity

What is further needed between both govt and RBI

1. Cash flow needs will be high for individuals and SMEs : thus putting cash in the hands of people, SMEs is needed like has been done in UK
2. Tax deferment for specific sectors and ordinary citizens is a must\
3. Long term economic impact not yet considered for the right reasons of unknown intensity of COVID. Thus over time a fund is necessary in the nature of a PE fund which is financed by the Govt and then leveraged up against a sovereign guarantee
4. Jobs losses for individuals and steps for managing their basic security
5. Specific initiatives for NBFC sector where the retail facing ones (which was the strength of the business model) is almost certainly going to be massively affected by NPAs, lack of growth, etc and will hurt even blue chips like Bajaj Finance, MM Finance, Shriram Transport, etc. The banking sector ahs today being protected to a large extent but not the NBFCs.