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Global brokerages welcome RBI measures, expect more rate cuts and growth in H2FY21

A 3-month moratorium for all term loan repayments will entail a one-time NPV hit for banks and NBFCs and problems will be acute for lower-rated NBFCs with limited funding options, CLSA has said.

March 31, 2020 / 02:34 PM IST

Top brokerages, including CLSA, HSBC and Morgan Stanley, have welcomed the raft of measures taken by the Reserve Bank of India to protect the economy and the financial system, saying the central bank may go for more rate cuts.

RBI governor Shaktikanta Das on March 27 announced a huge 75 basis points rate cut on March 27, bringing it to 4.40 percent from 5.15 percent.

Here is what brokerages have to say about the RBI measures:


While the measures to infuse liquidity, including targeted LTROs (long term repo operations), will support the bond market, the operationalisation and effectiveness of MPC measures are the keys to success.


A three-month moratorium for all term loan repayments will entail a one-time NPV (net present value) hit for banks and NBFCs and problems will be acute for lower-rated NBFCs with limited funding options, CLSA said.


The financial firm is of the view that the RBI delivered more than expected and the measures will not just help immediately but will also help in the reconstruction process.

All eyes were on the fiscal deficit and the role central bank would play in funding it, HSBC said.

"Given abundant liquidity, reverse repo rate could become more effective one," HSBC said, adding that the CRR cut by 100 bps would infuse primary liquidity of Rs 1.37 lakh crore across the banking system.

HSBC said the regulatory forbearance was likely to help banks and borrowers and banks being permitted to deal in offshore rupee NDF markets would help curb volatility.

The global financial firm expects growth to halt in the first half of FY21 but rise sharply in the second half of the current financial year.


Quantum of action by the RBI was substantial and largely satisfactory, Jefferies has said.

Measures such as the rate cut and $50 billion liquidity would accelerate monetary transmission while loan repayment deferrals would alleviate some bad loan concerns, Jefferies said.

BofA Securities

BofA Securities is of the view that the reverse repo rate cut works out to 90-115 bps after the enlargement of rate corridor. RBI was among few central banks that were still with sufficient arsenal to fight for growth, BofA said.

Infusion via TLTRO (targeted longer-term refinancing operations) for banks to buy corp bonds and CRR cut would assure markets, BofA said. The government may follow up with fiscal stimulus (1-1.5 percent of GDP), funded by RBI OMO, it added.

BofA believes deferral of interest payments should comfort borrowers at a time of uncertainty.

"We expect MPC to cut 25 bps each in June and October. RBI could continue to intervene up to $30 billion to stabilize the rupee," BofA said.


Nomura acknowledged that the RBI had announced necessary measures but said demand risks persisted.

"Relief announced is temporary and may have to be extended," Nomura said.

The brokerage is positive on stronger franchises and ICICI and Axis Bank are its preferred picks. "ICICI Bank and Axis Bank offer the safety net necessary to weather the storm," Nomura said.

If banks absorb NPV impact of deferred payments, it can impact NIMs by 7-10 bps, Nomura said.

Morgan Stanley

Morgan Stanley expects RBI's measures to help in eventual recovery as the disruptions ease."These measures reduce risk aversion in the financial sector and support financial stability," Morgan Stanley said.

The global financial firm said the measures would provide enough liquidity and reduce the cost of capital.

“In the base case, we expect the government to raise fuel taxes by Rs 9-10 per litre and use for stressed sectors. If disruptions linger for longer, RBI may lower rates by another 40 bps," Morgan Stanley said.

Morgan Stanley expects a gradual recovery in growth from Q3CY20.

Disclaimer: The views and investment tips expressed by investment experts on are their own and not those of the website or its management. advises users to check with certified experts before taking any investment decisions.
Nishant Kumar
first published: Mar 30, 2020 10:34 am
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