Finance Minister Nirmala Sitharaman said on Wednesday that state-run banks will launch a nationwide loan outreach program in October, as the government seeks to boost economic growth through a sustained credit push, particularly to Covid-affected small and medium businesses, retail, and farm sectors, amid fears that bankers have become risk-averse.
Sitharaman told reporters following a meeting with the heads of public-sector banks (PSBs) in Mumbai that the lenders disbursed loans of Rs 4.94 lakh billion through a similar outreach campaign in various regions between October 2019 and March 2021.
According to him, a proposal is being examined to offer a sovereign guarantee on security receipts issued by NARCL while purchasing problematic loans from lenders. According to an earlier IBA assessment, such a guarantee would cost the government Rs 30,600 crore over five years.
Various sectors of the economy, including exports, fintech, and the sunrise industries, require credit support, according to Sitharaman, and banks must meet this demand. To support their credit requirements, state-run banks have been ordered to have negotiations with exporters and various organizations. This will also help the Prime Minister’s one-district-one-product export idea gain traction.
Credit flow has remained sluggish in recent months, continuing to be one of the policymakers’ biggest headaches. Non-food bank credit grew at a slower rate of 5.9% in June, down from 6% a year earlier. In fact, after a 2.2 percent increase a year ago, loans to industry shrank by 0.3 percent in June. This is although, according to CARE Ratings, daily surplus liquidity in the banking system averaged as much as Rs 6 lakh crore in July and August.
Sitharaman stated “With changing times, now industries have the option of raising funds even from outside the banking sector. Banks are raising revenue through a variety of methods. These new aspects need to be studied to target credit where it is needed,”
State-owned banks have turned the corner, according to Panda, with earnings of Rs 31,820 crore in FY21, the highest in five years. With their solid financials, they were able to raise Rs 58,697 crore from the markets in FY21, including Rs 10,543 crore in equity capital. Their intentions to raise another Rs 12,000 crore this fiscal year have also garnered traction. Panda added that state-run banks’ net bad loans fell to 3.1 percent in FY21, down from 7.97 percent three years earlier. Similarly, their capital adequacy ratio (CRAR) was around 14%, compared to the required 10.875 percent.
The government also increased the family pension for bank personnel to 30% of the last-drawn income, providing relief to banker families. Previously, the heirs of a deceased PSB employee may get up to Rs 9,284 per month as a family pension. This cap has now been eliminated, resulting in family benefits rising to as much as Rs 30,000-35,000 per month, according to Panda. The finance ministry has also decided to increase the employer’s contribution to the New Pension Scheme (NPS) from 10% to 14% of the wage.
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