Finance Minister Nirmala Sitharaman rolled out measures to boost industrial credit growth to check slowdown in the economy. Nirmala Sitharaman will also conduct a meeting with the concerned stakeholders to finalise the decisions and the timeline for action, according to a statement by the Finance Ministry. The government has approved capital infusion of Rs 10,000 crore for Housing Finance Companies and has announced to provide additional liquidity for individual housing loans to make the houses affordable for the people. Finance Minister has also approved the one-time partial credit guarantee to PSU banks for the purchase of high rated pool assets of Non-Banking Financial Companies, which are financially sound.
Nirmala Sitharaman will be meeting heads of all the PSU banks and major private sector banks to review the credit growth in different sectors of the economy, according to an announcement by the Ministry of Finance.
Bank credit has started to slow down since March due to a decline in demand and supply, while it was rising at the beginning of the year. Especially after the IL&FS default case, credit from NBFCs has also slowed down since September last year. Among the loans extended to the commercial sector, the share of NBFCs reduced by almost 12 per cent year on year to just 26.6 per cent in 2018-19, according to the RBI Financial Stability Report.
A report by HSBC underlines that the fallout in the NBFC sector last year has resulted in a fall in consumer credit, which coupled with the rising urban unemployment has adversely affected the urban consumption. To maintain liquidity in the companies, the Parliament had recently approved the amendments in the Insolvency and Bankruptcy Code, which will help in quick decision-making among creditors of the bankrupt companies. The amendment is also aimed to reduce the time lost in litigation.