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Ahead of the festival season, Finance Minister Nirmala Sitharaman on Thursday opened the liquidity tap, directing banks and NBFCs to jointly hold public forums for distribution of loans to the credit-needy segments of the society.
The effort is to push liquidity to those who are struggling to access funds while at the same time ensuring that the current regulations are complied with. Under the new mechanism, which will cover 400 districts in two phases, banks and NBFCs operating in the districts concerned will meet credit seekers at a common forum ( shamiana -like meetings) for addressing their liquidity needs. Minister of State for Finance Anurag Thakur will oversee this project.
In the first phase, 200 districts will be covered between now and September 29. In the next phase, another 200 districts will be covered from October 10 to 15.
Briefing reporters after a three-hour-long meeting with the top brass of the Public Sector Banks (PSBs), Sitharaman also advised the banks to ensure that none of the MSME stressed loan is declared an NPA and the MSMEs are made to avail the already available RBI dispensation for restructuring stressed assets. This arrangement will be available till March 31, 2020. Although the RBI has provided a scheme for restructuring of MSME advances, most of the entities are unaware of it.
Sitharaman said that she has advised banks to ensure that MSMEs are educated about this facility.
“No stressed asset in the MSME sector will be declared an NPA till March 31, 2020,”she said.
New target: Five-for-one
Sitharaman also said that she has advised the banks to get five ‘new to credit’ customers for every one old customer that the bank is currently servicing.
When asked whether the five new customers should be from the retail or MSME segment, Sitharaman said they could be from both.
Sitharaman also reviewed PSBs’ performance on the various initiatives announced earlier on credit growth, rate cut transmission, and amalgamation. Discussions on the performance of the banks were held with the focus on supporting credit needs of the economy, in particular, the needs of NBFCs, HFCs, and MSMEs, and enabling better access to cheaper credit.
Later, a statement issued by the Finance Ministry said that to enable automatic transmission of externally benchmarked rates, 15 PSBs have already introduced repo rate-linked loan products for housing and vehicles, consumer credit, cash credit limits, and mortgage-based loans.
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