Also wants Rs 11-lakh-crore idle cash with public to be brought in the banking system
Finance Minister P Chidambaram on Saturday asked public sector banks (PSBs) to reduce equated monthly instalments (EMIs) on loans for consumer durables, in order to kickstart investment cycle and bolster the sagging economic growth.
He also asked banks to ensure the cash lying with the public — about Rs 11 lakh crore —was channelised into the banking system. For this, he wanted banks to upgrade their ATMs to function as cash-accepting machines too, from only cash disbursal tools at present.
He was speaking at a press conference after reviewing the functioning of public sector banks at a four-hour meeting with their chairmen.
|WHAT THE FINANCE MINISTER WANTS|
Consumer durables have been one of the silver linings in otherwise dismal industrial output. While the entire industrial production contracted 1.8 per cent in June and 0.1 per cent in the first quarter of the current financial year, consumer durable goods posted a growth of 9.1 per cent and 8 per cent in these periods, respectively.
Chidambaram said a factor inhibiting the growth of consumer durables was EMI. “The middle class is complaining about EMIs, either these have been increased or payments have been stretched,” he said.
As such, the middle class postpones these purchases. “That is not good for the industry and for the economy. Just as the investment plans must be brought forward, people must be encouraged to buy consumer durables that will keep the investment engine going.”
Officials said, when banks asked how they could cut EMIs, they were told to reduce bulk deposits and take deposits of PSUs on the card rate.
Later, RBI Deputy Governor K C Chakrabarty said 60 per cent of the total deposits of the PSU banks was bulk deposits. He said cutting of rates by RBI would not bring as much change in interest rates as banks reducing bulk deposits and interest rate on these savings.
To a query, the finance minister said gross non-performing assets (NPAs) of banks, at 3.17 per cent as on March 31, 2012, did not reflect any alarming picture. Once the economic growth picks up, NPAs would also come down, he said.
In 2011-12, the Indian economy grew 6.5 per cent, the slowest in nine years. Most analysts have pegged economic growth at sub-six per cent for this financial year, but the Prime Minister’s Economic Advisory Council has projected it to grow by 6.7 per cent.
The ensuing Maharastra Budget may witness several tax relief for the dealers, traders and growers of agricultural and allied services.
The action is based on recommendations of the Financial Sector Legislative Reforms Commission