FM Sitharaman asks PSBs to conduct credit outreach programme across India

Finance Minister Nirmala Sitharaman on Wednesday asked public sector banks (PSBs) to reach out to various sectors, especially export, to address their credit needs in order to keep up the momentum of the stimulus for economic revival. She also told them to conduct a credit outreach programme in every district of the country, starting October.

“I don’t think it is time yet to conclude that there is no credit pick-up. Even without awaiting indications, we have taken steps to ramp up credit,” Sitharaman said while addressing the media in Mumbai.

Banks had done a similar exercise in 2019 wherein they covered all districts and extended all kinds of credit facilities to meet the demand requirements. Between October 2019 and March 2021, Rs 4.94 trillion worth of loans were distributed.

The government’s push comes at a time when credit growth is hovering around 6 per cent due to risk aversion by lenders as well as borrowers. As corporates are deleveraging and moving to capital markets for their funding requirements, banks have focused on the retail segment to boost credit off-take. However, after the second wave of the Covid-19 pandemic, stress in the retail segment has increased.

The finance minister said banks had been asked to interact with export promotion agencies and industry and commerce bodies so that the requirements of exporters could be timely addressed. PSBs should extend assistance to the sunrise sectors by understanding their financial requirements, she said.

Further, banks should come up with specific plans for the northeast states. In eastern states like Bihar, Jharkhand, and West Bengal where CASA (current account savings account) deposits are piling up, she asked banks to focus on greater credit expansion so that the fund flow to business units in that region could be better promoted.

She acknowledged that collectively PSBs had done well and some of them had come out of the Reserve Bank of India’s prompt corrective action framework. And, despite being engaged in extending facilities for all DBT (direct benefit transfer) beneficiaries, PSBs’ amalgamation, which happened just prior to the pandemic, had not suffered. “They have completed the process and the process of amalgamation has not resulted in any customer suffering,” she said.

“They have also shown that they are in a position to go to the markets and raise money for their growth requirements,” the FM said.

Banks raised about Rs 10,543 crore last year from the market. “So, the capital requirement of banks is being met by themselves, and in the first five months of the current financial year, Rs 7,800 crore worth of fundraising is in the process,” Debasish Panda, secretary, department of financial services, said.

The FM reiterated that the government would have a bare minimum presence in the strategically important sectors. Since banks, financial institutions, and insurance have been identified as strategic sectors, the government will not exit them, but will have minimal presence.

“If minimum presence is something that has to be there as per policy, I will obviously be present in LIC, in the general insurance industry, and somewhat in the reinsurance sector also,” she added.

The government will look to amalgamate or disinvest in entities in the financial sector after ensuring that it has minimum presence, she said.

In the life insurance space, LIC, which is the largest insurer in the country, is state-owned. The government is looking to list it on the bourses by the end of FY22.

Commenting on the inflation print, Tarun Bajaj, revenue secretary, said, “Our own estimation is that the inflation rate will remain between 4 and 6 per cent, which the government has mandated the RBI to maintain in the coming financial year.”

He said the government had reduced duties on a number of products such as edible oils and pulses where major price rises were taking place. The government has also ensured that extra pulses and edible oil are coming from outside the country so that the supply is improved. “We are taking care of important items in the consumer basket,” Bajaj said.

Touching upon the issue of the National Asset Reconstruction Company Ltd (NARCL) or bad bank, Panda said the IBA had gone to the RBI just two days ago for the licence. “We expect the licence to come soon. They have identified the assets which have to be transferred. The process of getting the inter-creditor agreements is also in the works. So by the time the license is obtained, they are in a position to transfer the assets."