Meet with bankers: FM Sitharaman wants credit flow boost, faster stimulus release

By: |
May 23, 2020 3:45 AM

Finance minister Nirmala Sitharaman held a crucial meeting with top executives of state-run banks and refinancing institutions on Friday to review their preparedness in implementing the Rs 21-lakh-crore relief package to tackle the pandemic and drive a massive credit push to stage a rebound in economic growth.

Various announcements by both the government and the central bank to soften the blow to critical sectors of the economy, such as MSME, NBFCs and agriculture, topped the agenda.Various announcements by both the government and the central bank to soften the blow to critical sectors of the economy, such as MSME, NBFCs and agriculture, topped the agenda.

Finance minister Nirmala Sitharaman held a crucial meeting with top executives of state-run banks and refinancing institutions on Friday to review their preparedness in implementing the Rs 21-lakh-crore relief package to tackle the pandemic and drive a massive credit push to stage a rebound in economic growth.

The meeting, held via video conference, focussed on the flow of working capital loans and Covid-related emergency credit (both sanction and disbursement) to firms, amid perceptions of growing risk aversion in the banking sector. The Rs 3-lakh-crore collateral-free loan for MSMEs with full govt guarantee and the Rs 45,000-crore liquidity for shadow lenders under the new partial guarantee scheme featured prominently in the discussion.

The pandemic-related Rs 50,000-crore refinancing through Nabard, SIDBI & National Housing Bank, too, was discussed, along with the utilisation of a Rs 30,000-crore special liquidity window via Nabard, said a top banker who attended the meeting. Nabard will utilise the funds to push liquidity through regional rural banks and co-operative institutions, and expand the ongoing drive to enlist 25 million new farmers for concessional credit as part of its Covid-19 relief package.

Various announcements by both the government and the central bank to soften the blow to critical sectors of the economy, such as MSME, NBFCs and agriculture, topped the agenda.

Loan flow to agriculture just ahead of the Kharif sowing season, small businesses and non-banking financial companies (NBFCs) was reviewed, along with the lenders’ transmission of the benefit of rate cuts by the central bank to customers.

Commenting on the credit flow, Sitharaman last week said while banks had been sanctioning loans, many borrowers wanted the disbursement to take place only after the lockdown was lifted. This was one of the reasons why banks chose to park funds under the reverse repo route, she added.

As the Covid-19 outbreak has plunged the country into an unprecedented crisis, the economy requires a massive credit push to get back on its feet. Public-sector banks (PSBs) will have to do the heavy lifting, especially as shadow-lenders’ ability to boost credit has been severely impaired by the pandemic and private banks remain guarded about their fresh exposure.

Having risen at a double-digit pace in FY19, non-food credit growth faltered last fiscal. Even before the Covid-19 started to spread, non-food credit growth crashed to just 6.3% year-on-year in the fortnight through February 14, the lowest since May 2017, mirroring a broader economic slowdown and risk aversion among bankers. The credit growth stood at 6.67% in the fortnight ended April 24.

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