RBI Allows Banks To Invest In REITs

Even as faced with a big challenge of managing excess liquidity following demonetisation, the RBI has rightly not really gone overboard and resorted to much-feared measures like hike in Cash Reserve while leaving the policy interest rates unchanged is on the expected lines, said ASSOCHAM.

Commenting on the RBI’s first credit policy in fiscal 2017-18, Assocham President Sandeep Jajodia welcomed the permission given by the central bank to the banks to invest their funds in the Real Estate Investment Trusts (REITs). “This would give a boost to the sector which has been witnessing tough times in the last few years. The decision really augurs well for the real estate sector,” Jajodia said.

Reading into the policy, the Assocham finds that the RBI remains quite cautious on inflation going forward, though some measures were required to lift the credit offtake and give impetus to the growth. While 25 basis points rise in reverse repo rate should help their bottom line, a clear roadmap, coupled with strong political will is required to resolve the issue of burgeoning non-performing assets. “Though the RBI wants banks to work on the stressed assets, finer points and clear cut glide path is required to resolve the NPAs in a time bound manner,” the chamber President said, adding the promised measures are rolled out soon.

However, the Assocham President the focus on the RBI appears to be on liquidity management and anchoring inflationary expectations; thus growth impetus may not be its priority area. In any case, with so much of surplus liquidity, the banks should be nudged further to transmit the lower cost of funds to the borrowers.

Jajodia also welcomed the RBI’s observations that the banks need to get well re-capitalised either from the market or the principal shareholders, the government.