Before rolling out the second fiscal stimulus package, the government has planned to garner higher revenue on fuel and increased the projected annual borrowing by over Rs 4 lakh crore.
Finance Minister Nirmala Sitharaman’s discussion with PSU banks’ chiefs, which was supposed to take place today, has been postponed for later this week. Speculations were that FM Sitharaman was about to review issues such as credit flow to key sectors like MSMEs and NBFCs, rate transmission to borrowers, and progress under the targeted long-term repo operations (TLTRO) before the second fiscal stimulus package is released. The deployment of excessive funds by banks under the reverse repo route and the repayment moratorium were also expected to be discussed today. The discussion with PSU banks also gets important as they are the driving force of the package released by the government.
To provide cover to the economy, the role of PSU banks can be understood by the fact that the state-run banks contacted more than 95 per cent of borrowers eligible for emergency credit lines and working capital enhancements between March 20 – May 6, according to the Ministry of Finance.
In the first mega economic package, the Finance Ministry pledged stimulus worth Rs 1.7 lakh crore amid the coronavirus pandemic. Before rolling out the most-awaited second fiscal stimulus package, the government has planned to garner higher revenue on fuel by raising excise duty on petrol and diesel and increased the projected annual borrowing by more than Rs 4 lakh crore this fiscal.
Meanwhile, RBI Governor Shaktikanta Das also held a meeting with the chiefs of PSU and private banks earlier this month. In the discussion, the Reserve Bank governor reviewed the economic situation and the implementation of various measures announced by the central bank. The RBI had slashed the benchmark interest rate by a massive 75 basis points last month and also announced a three-month moratorium period for the loan repayment in order to provide relief to borrowers whose income has been hit due to the lockdown.