Economy

PM urges bankers to support economy in tough Covid-19 times, boost revival

Our Bureau New Delhi | Updated on July 30, 2020 Published on July 29, 2020

Prime Minister Narendra Modi   -  PTI

The Prime Minister Narendra Modi has urged chief executives of both public sector and private sector banks to do some heavy lifting to support the economy during the ongoing Covid-19 pandemic so as to enable its quick revival in the days to come.

This was conveyed during the three-hour-long brainstorming virtual meeting that the Prime Minister had with the bank chiefs on Wednesday, sources said.

Groups of bankers made presentation to the Prime Minister on various aspects of the financial sector and economy, it is learnt. The main purpose of the brainstorming session is to discuss and deliberate on roadmap and vision for the future.

Modi is understood to have underscored the importance of Atmanirbharat - self-reliance of the economy. 

At the meeting, the crucial role of the financial and banking system of supporting growth was discussed. It was noted that the small entrepreneurs, SHGs, farmers should be motivated to use institutional credit to meet their credit needs and grow. Each bank needs to introspect and take a relook at its practices to ensure stable credit growth. Banks should not treat all proposals with the same yardstick and need to distinguish and identify bankable proposals and to ensure that they get access to funding on their merit and don’t suffer in the name of past NPAs.

It was emphasised that the Government is firmly behind the banking system. The government is ready to take any steps necessary to support it and promote its growth, an official release issued late Wednesday evening said.

Banks should adopt fintech like centralised data platforms, digital documentation and collaborative use of information to move towards digital acquisition of customers. This will help increase credit penetration, increase ease for customers, lower costs for banks and also reduce frauds.

India has built a robust, low cost infrastructure which enables every Indian to undertake digital transactions of any size with great ease. Banks and Financial Institutions should actively promote the use of RUPAY and UPI amongst its customers.  

The progress of schemes like emergency credit line for MSME, additional KCC cards, liquidity window for NBFC and MFI was also reviewed. While it was noted that significant progress has been made in most schemes, banks need to be proactive and actively engage with the intended beneficiaries to ensure that the credit support reaches them in a timely manner during this period of crisis, the release added.

This meeting comes at a time when the Indian economy is expected to register a V shaped recovery in Q2 and Q3 (due to base effect) even though it is expected to contract on an overall basis and remain in negative territory this fiscal.

The Prime Minister's nudge to bankers to push credit is significant as it comes at a time when there is strong perception that banks have turned risk averse given the expected surge in Non-Performing Assets (NPA) in the economy post the end of the RBI announced moratorium on August.

This meeting of the Prime Minister with bank chiefs comes days before the  Monetary Policy Committee chaired by RBI Governor is scheduled to meet on August 4-6. Pressure is mounting on the RBI to allow one time restructuring of assets and indications are that MPC will take a call on this issue in the upcoming meeting.

 

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Published on July 29, 2020
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