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ICICI Securities: RBI Policy Action Enhances Liquidity, Augments Credit Flow

ICICI Securities: RBI Policy Action On BFSI Sector - Rate Status Quo, Liquidity Enhanced, Credit Flow Augmented

A teller agent verifies the authenticity of Five Hundred Rupee currency notes tendered by a customer at its Connaught Place branch in New Delhi, India. (Photographer Amit Bhargava/Bloomberg News.)
A teller agent verifies the authenticity of Five Hundred Rupee currency notes tendered by a customer at its Connaught Place branch in New Delhi, India. (Photographer Amit Bhargava/Bloomberg News.)

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

ICICI Securities Report

The Reserve Bank of India’s Monetary Policy Committee has voted unanimously for status quo.

Though it is an accommodative stance, intentions seem supportive to revive lending to small businesses and housing sector—imbibing confidence through liquidity enhancement and credit flow augmentation measures.

A few notable measures:

1. On-tap targeted long term repo operation with tenure up to three years for Rs 1 trillion up to March 2021; this is with an option of refinancing previous long term repo operation before maturity to ensure undisrupted liquidity to targeted sectors.

2. Rationalisation of risk-weights on individual housing loans linking it only to loan-to-value (and not ticket size), benefiting housing loans with ticket-size above Rs 7.5 million (now attracting 35% risk weights) sanctioned up to Mach 21, 2022 - capital savings of 8-10 basis points (Rs7 billion-8 billion).

3. Regulatory retail portfolio threshold enhanced to Rs 75 million (from Rs 50 million earlier); 2% eligible bank credit to attract 75% risk weights (Rs 50 billion-60 billion capital saving on incremental qualifying exposure).

Click on the attachment to read the full report:

ICICI Securities BFSI RBI Policy Action_Oct20.pdf

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