Finance Minister Nirmala Sitharaman has asked public sector banks (PSBs) to go for further cuts in interest rates on loans in a bid to spur economic activity. According to various media reports, the finance minister conveyed her disappointment as loan transfer from banks to customers was not happening at the expected rate.
In a meeting on Tuesday, Sitharaman also told bankers to focus on the Emergency Credit Line Guarantee Scheme (ECLGS) and has asked the lenders to extend the credit to other businesses than Micro Medium and Small Industries (MSMEs). She reportedly asked the banks to ensure smooth credit flow under the Rs 3-lakh-crore loan programme, mainly for SMEs, and expedite the progress of two schemes meant to facilitate Rs 75,000-crore liquidity for NBFCs.
ECLGS is a collateral-free loan expected to enable small businesses to pay for salaries, rent and restocking. It will also provide an incentive to banks and non-bank lenders to offer additional funding facility to small borrowers, by providing them 100 per cent guarantee for any loan default.
The meeting was held 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.
PSBs have already disbursed as much as Rs 8,320 crore in just five days for 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. “PSBs will continue to focus on sanction and reaching out to eligible MSMEs. To also target meeting credit needs of other businesses,” finance ministry’s department of financial services said in a tweet.
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.