New Delhi: Union Finance Minister Nirmala Sitharaman on Thursday hoped the economy will start looking up in the second half of the current financial year as consumption rises and banks increase their lending operations.
Weeks after meeting public sector bankers, Sitharaman met private-sector lenders and financial institutions which, according to her, categorically stated they are not facing a liquidity crisis. They also said there is enough demand for loans, she added.
“On the whole, it was a very tonic-like meeting where I heard good things, positive thing,” she said, adding that “the message I got is that consumption is happening”.
Sitharaman indicated that economic slowdown seems to have bottomed out and the coming festive season will help the economy start looking up. The GDP growth in the first quarter of the current financial year slipped to an over six-year low of 5%.
Sitharaman further said the private sector banks and financial institutions told her that the slump in commercial vehicle sales is “cyclical” and likely to pick up in the next one or two quarters. As regards the slowdown in the passenger vehicle segment, she was told it was driven by “sentiments” and will improve in the near future.
Financial Services Secretary Rajiv Kumar said public sector banks will hold an outreach programme in 400 districts across the country during the festival season with a view to enhancing credit disbursal. In the first phase between October 3 and October 7, 250 districts will be covered. Private sector banks have also been invited to join the programme.
During the meeting, banks and non-banking financial companies (NBFCs) also suggested that the limit for affordable housing eligibility should be raised to Rs 50 lakh from the current Rs 45 lakh.
Noted private banker Uday Kotak, one of the attendees, said the private investment will respond to the reduction in corporate tax. He said most banks will follow external benchmark-based lending from October 1.
Kotak said private-sector lenders would very much like to contribute to the customer outreach and double their lending efforts over the next 30 to 60 days. “We believe in one country, one financial system. This is an opportunity for us to do what is our ‘dharma’. It provides an opportunity to grow our business through the outreach programme,” he said.
Some of the lenders have stressed the need for self-declaration of present address in respect of borrowers who are e-KYC authenticated to enable hassle-free lending and ease in co-origination of loans by banks and NBFCs. Sitharaman assured them that appropriate instructions would be issued to address the concern by October 1.
On the issue of the restriction imposed on Punjab & Maharashtra Cooperative (PMC) Bank, Sitharaman said the RBI as a regulator is handling it at this stage and also provided some relaxation.
“I don’t think I’ll get into this at this stage. Will wait, let there be some kind of comprehensive picture emerging post which certainly the government will have to see what best can be done,” she said, adding that the government’s intention is to have a stable environment.
In a major relief to the hapless customers of crippled PMC Bank, the RBI on Thursday increased cash withdrawal limit to Rs 10,000 per account from Rs 1,000 set earlier over the next six months.