Sitharaman held a crucial meeting with top executives of state-run banks and SIDBI on Tuesday to review the implementation of various schemes under the Rs 21-lakh-crore relief package.
Finance minister Nirmala Sitharaman on Tuesday asked state-run banks to ensure smooth credit flow under the Rs 3-lakh-crore loan programme, mainly for small and medium businesses, and expedite the progress of two schemes meant to facilitate Rs 75,000-crore liquidity for NBFCs, sources told FE.
Sitharaman held a crucial meeting with top executives of state-run banks and SIDBI on Tuesday to review the implementation of various schemes under the Rs 21-lakh-crore relief package to tackle the pandemic and drive a massive credit push to stage a rebound in economic growth.
Already, public sector banks (PSBs) have disbursed as much as Rs 8,320 crore in just five days of the implementation of the Rs 3-lakh-crore Emergency Credit Line Guarantee Scheme (ECLGS) from June 1, while the sanctioned loans stood at Rs 17,706 crore.
On Tuesday, the finance ministry said the sanctioned loans have crossed Rs 20,000 crore. The government has pledged full guarantee for up to 20% additional, collateral-free working capital loans under the ECLGS. It has earmarked a corpus of Rs 41,600 crore over the current and the next three financial years to implement this scheme. As many as 45 lakh units can resume business activity and safeguard jobs, the government recently announced.
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. Also discussed was the partial credit guarantee scheme (PCGS) 2.0 worth Rs 45,000 crore, which is aimed at improving liquidity for low-rated shadow lenders. The government has also eased certain criteria for the pooled purchase of NBFC assets by state-run banks under the existing PCGS 1.0.
The minister also reviewed the progress of a special liquidity scheme worth Rs 30,000 crore for shadow banks. Under this, the Reserve Bank of India will indirectly purchase debt sold by NBFCs, housing finance companies (HFCs) and micro-finance institutions (MFIs), an official source had said recently. A large state-run bank will set up a special purpose vehicle (SPV) to manage a stressed asset fund, which will raise money by issuing securities worth Rs 30,000 crore guaranteed by the government. These securities will be purchased only by the central bank. The government will contribute Rs five crore towards the equity of the SPV.
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.