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New Delhi : Union Finance & Corporate Affairs Minister Nirmala Sitharaman on August 5, 2019, reviewed the performance of banks here at a meeting with the top management of Public Sector Banks, HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, and Citi Bank. RBI Deputy Governor N S Vishwanathan also participated in the review.

The meeting was the first of a series of meetings that the Ministry of Finance is convening to discuss current economic issues with key stakeholders including some of the industry sectors whose growth has been affected in recent months. The August 5  meeting was on the banking sector. This will be followed by meetings with the MSME sector, the automobile sector, industry associations, financial market stakeholders, and real estate and home-buyers in coming days. The Government will factor in the takeaways from these consultations for appropriate policy responses to maintain a high growth trajectory and to address sector-specific issues.

The meeting on the banking sector focussed on overall credit growth to support the needs of the economy. Further, ways in which banks may help some of the sectors that have been drivers of economic growth to deal with their current issues were discussed. In particular, the credit needs of the NBFC, automobiles and MSME sectors were discussed. Transmission of benefits of rate cuts to borrowers and industry was also discussed. Digitalisation efforts were reviewed with a view to step up efforts in this direction. Banks also articulated some issues they have been facing in service tax, and these were taken note of by the Revenue Secretary and Chairman, Central Board of Indirect Taxes and Customs.

Overall credit growth from the banking system continues to be at 12%, which is marginally lower than the growth of 13.3% at the end of March. At the same time, with turnaround in the NPA cycle, high provision cover of over 75%, and record recovery, bank balance-sheets are healthier than before. Banks are now, therefore, in position to step up lending.

Against this backdrop, banks committed in the review to step up affordable and hassle-free credit, with a special focus on the MSME and consumer finance sectors. As part of this, banks have decided to increase the in-principle approval limit for contactless digital lending to MSMEs on the PSB59minutes.com portal to Rs 5 crore. Going forward, banks would be expanding the contactless digital lending facility through the portal to retail lending products for personal loans, vehicle loans and home loans.

It was noted during the review that bank credit to the NBFC and HFC sector has risen by nearly Rs 90,000 crore since September 2018, helping address the sector’s liquidity needs. In addition, pool buy-outs of over Rs 40,000 crore by Public Sector Banks have helped the NBFC and HFC sector reduce their asset liability mismatch. In the review, banks committed to continue supporting the sector by making prudent use of partial credit guarantee from the Government for purchase of pooled assets of NBFCs and HFCs of up to Rs 1 lakh crore.

National Housing Bank (NHB) has also brought out a new scheme to enable HFCs to take refinance from it for their pool of existing developer loans as well as individual housing loans and HFCs can then use the liquidity so provided exclusively for individual loans for affordable housing.

Banks would redouble efforts to extend cheaper, hassle-free and cash-flow based credit to MSMEs by leveraging GST, digital payments and alternate data. Banks would also expedite restructuring of viable MSME units facing stress, under the special MSME restructuring dispensation available till March 2020.

As a result of Government’s thrust on digitalisation, digital transactions have grown to 769% of GDP by March 2019, up from 726% a year ago. The recent amendments mandating that business establishments with over Rs 50 crore turnover accept digital payments and waiver of charges on NEFT and RTGS will give a fillip to further digitalisation. The banks committed to review charges on digital payments with a view to making them cheaper for customers vis-à-vis cash payments.

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