Ministry may direct banks to offer discounted loans in festive season

  • Mahua Venkatesh, Hindustan Times, New Delhi
  • Updated: Aug 19, 2014 00:50 IST

Retail loans may get cheaper this festive season.

With buyers shying away from purchases due to the ongoing slowdown, the finance ministry is likely to nudge public sector banks to look at ways to lure wary customers, a move that will also improve lenders’ credit demand situation. However, with banks saying that there’s limited scope to reduce interest rates on such loans, other charges including processing fees may be waived off.

However, no decision has been taken yet.

“While the government does not interfere in the affairs of banks, it could review the credit demand situation and if need be, ask banks to look at ways to boost demand,” a senior government official told HT.

Following former finance minister P Chidambaram’s diktat, banks had come up with several festive offers last year. In September 2013, just ahead of the festivals, appetite for credit picked up with credit growth touching 18% after remaining lull for the entire first half.

“So this year, too, the exercise could be undertaken and it would be seen as a measure to boost credit,” the official added.

Bankers also said that with the surge in the level of bad assets — loans that do not fetch returns—lenders have been wary in giving loans to retail customers as well as companies.

“Until now the credit demand has remained weak but we expect it to pick up from now on. Typically, credit demand is stronger in the second half of the financial year,” said TM Bhasin, CMD, Indian Bank.

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