Finance Minister Nirmala Sitharaman is set to hold a review meeting with state-owned banks on Monday (May 11) to take updates on credit flow to industries at a time when economic activities have started to resume. The discussions will focus on banks' reluctance to lend to non-banking financial companies (NBFCs) and to get a sense from the lenders about their decision to park huge surplus funds with the banking regulator. The FM will take stock of the credit sanction and disbursement by the banks since March 1, 2020, and the Covid-19-related emergency credit lines opened by the lenders. ALSO READ: Additional borrowing to widen fiscal deficit, but help govt perk up economy One of the agenda items stated that the discussions will look at the banks’ progress under the Reserve Bank of India (RBI)'s Targeted Long-Term Repo Operations (TLTRO). The RBI had received bids for only about half the Rs 25,000 crore it offered under its revised TLTRO last month, indicating that banks were reluctant to lend to NBFCs. Sitharaman will review the credit flow to the NBFCs and “interest rate transmission to borrowers” along with “deployment of funds under reverse repo.” Reverse repo rate is the interest rate that the RBI pays to banks for parking surplus funds with it.
Although it has been cut twice, banks have deployed Rs 8.53 trillion at the reverse repo window.ALSO READ: Carlyle Group to buy 74% in SeQuent Scientific for over Rs 1,500 crore “Banks have sanctioned loans to companies, but these have not yet been disbursed as industries are waiting to start business. This is a major reason why the banks have parked surplus funds with the central bank,” a top Finance Ministry official explained, requesting anonymity. The Finance Ministry said on Thursday that state-owned banks sanctioned loans worth Rs 5.66 trillion during March-April this year.