Banks will ensure bill discounting facility for MSMEs to ease liquidity: Sitharaman

Finance Minister Nirmala Sitharaman said on Monday that public sector banks have sufficient liquidity and efforts are being made to ensure that due payments are released to micro, small and medium enterprises (MSMEs) sector by large corporates.

"To ensure liquidity for small businesses, banks have been asked to provide bill discounting facility to the MSME sector against payments due from the large corporates," she said while briefing reporters after meeting heads of state-run banks for measures to boost the economy.

Bill discounting is an arrangement under which a seller recovers an amount of sales bill from financial intermediaries before it is due. Such intermediaries charge a fee for the service.

On the merger of banks, everything is going smoothly, the bank boards have all been on board, they have taken the necessary steps to keep that process going smoothly, the minister said.

On the amalgamation of 10 public sector banks into four stronger lenders with countrywide networks and global reach, Sitharaman said their respective board of directors have taken steps to keep the process proceeding smoothly.

On the Punjab and Maharashtra Cooperative (PMC) Bank crisis, she said the Reserve Bank of India (RBI) will ensure that the interests of customers are protected.

Last month, the RBI capped withdrawals at Rs 10,000 per account and asked the bank to not grant or renew any loans and advances, make any investment or incur any liability, including borrowal of funds and acceptance of fresh deposits.

The central bank's directions were necessitated on account of major financial irregularities, failure of internal control and systems of the bank and wrong or under-reporting of its exposures under various off-site surveillance reports.

Monday's review meeting with CEOs of public sector banks to discuss various issues, including progress on credit offtake, as part of efforts to prop up the economy.

The meeting review fund flow to stressed non-banking finance companies (NBFCs) and MSMEs. The banks also presented their report card on partial credit guarantee scheme and fund raising from the market to enhance their capital base.

Meanwhile, Finance Secretary Rajiv Kumar said the public sector banks disbursed Rs 81,781 crore in the nine days of 'loan mela' from October 1 to 9.

He said that an amount of Rs 34,342 crore was disbursed to new entrepreneurs, adding that the lenders followed prudential norms while disbursing the loans.

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