Nirmala Sitharaman announces loan festivals to spur demand
Loans will be disbursed under a “shamiyana” (tent), and both banks and NBFCs will give loans to new customers, including homebuyers, farmers, micro, small and medium enterprises (MSMEs) and retail consumersUpdated: Sep 20, 2019 03:02 IST
The government on Thursday directed state-run banks and non-banking finance companies (NBFC) to hold “loan melas” (loan festivals) across 400 districts during the coming festive season to boost consumption and accelerate economic growth.
Loans will be disbursed under a “shamiyana” (tent), and both banks and NBFCs will give loans to new customers, including homebuyers, farmers, micro, small and medium enterprises (MSMEs) and retail consumers, finance minister Nirmala Sitharaman said after a meeting with the top management of public sector banks in New Delhi.
The “loan melas” will be monitored by minister of state for finance Anurag Singh Thakur, who will ensure disbursal of loans in the presence of people’s representatives such as ministers or members of Parliament, she said.
Banks have been asked to give loans to new customers instead of recycling loans to old customers to make up the numbers, Sitharaman said. Her target to them is to extend loans to five new customers for every one existing customer.
The loan disbursal camps will be held in two rounds – the first round will cover 200 districts between October 3 and October 7, while the second round will kick off from October 11, a finance ministry spokesperson added.
Government officials with direct knowledge of the matter said on condition of anonymity that the dates have been selected to coincide with the festive season. Many people buy consumer durables, jewellery, cars, and houses during the festive season that typically lasts between September and December. It usually starts with Onam in September, peaks with Diwali in October (this year) or November, and then ends around Christmas and the New Year.
On August 30, Hindustan Times reported that slowing household demand has eroded economic growth — a fact signalled by high-frequency indicators such as domestic car sales that have been on a steep decline. The bimonthly consumer confidence survey of the Reserve Bank of India (RBI) has reported a sharp fall in the net share of respondents who see their non-essential spending going up either now or a year later. Private Final Consumption Expenditure (PFCE), which accounts for more than half of India’s GDP, grew just 3.1% in the June quarter.
India’s economic growth slowed to an over six-year low in the June quarter, the fifth straight quarterly decline in growth — the first time since June 1997 that such a prolonged slump has been recorded. According to the latest data released by the Central Statistics Office (CSO) on August 30, the economy expanded 5% from a year ago in the first quarter of 2019-20, after growing 5.8% in the quarter ended March 31, 2019, the fourth quarter of the last financial year. The growth rate in the first quarter of the current fiscal year has been the slowest pace of growth since the quarter ended March 31, 2013, when GDP, the value of goods and services produced in the economy, had expanded 4.3%.
In order to provide relief to stressed MSMEs, the government has asked banks to evoke the Reserve Bank of India’s guidelines that would prevent them from declaring these as non-performing assets (NPAs) even after 90 days of defaults till March 31, 2020. “Stressed assets will get restructured, or remain stressed, but they will not be declared NPAs till March 31, 2020,” Sitharaman added.
The minister said she had asked banks to give a report on the progress made by them with regard to a one-time settlement (OTS) scheme for MSMEs between July 1 and September 30. Sitharaman will review the progress made by banks on measures to boost the economy that she announced on August 23 and August 30.
The finance minister on August 23 announced a slew of measures to boost credit flow that included instructions to banks to launch repo rate-linked loan products to quickly pass on the benefit of policy rates cuts to borrowers, online tracking of loan applications, a transparent OTS policy to benefit MSMEs and time-bound return of loan documents within 15 days of loan closure.
In the second round of policy announcements to boost the economy, Sitharaman on August 30 announced mega mergers of 10 state-run banks into four strong lenders for efficient and robust credit flow in the economy.