Stressed MSME loans won't be declared non-performing till March 2020, says finance minister
In an effort to boost liquidity in the economy, finance minister Nirmala Sitharaman on Thursday announced that the public sector banks will organise 'Shamiana meetings' with non-banking financial companies (NBFCs) and retail borrowers in 400 districts to provide loans. The loans will be offered to homebuyers and farmers, among others.
Banks have also been asked not to declare any stressed loan of micro, small and medium enterprises (MSMEs) as a non-performing assets until March 31, 2020.
The public meetings to offer loans to borrowers will be held in two phases. In the first phase, loans will be offered to the borrowers in 200 districts from September 24 to 29, and in the second one between October 10 and 15 in another 200 districts. The districts where the meetings are to be held will soon be finalised. "The idea is that before festival season, the liquidity available with the banks should be able to reach the customers," Sitharaman told reporters after chairing a meeting of the heads of the public sector banks in Delhi.
She said there is a general impression that the liquidity is not reaching the ground. The government is ensuring that the whose who are seeking loans and are creditworthy don't suffer, she said.
Sitharaman also announced that the stressed MSMEs would not be declared NPAs until March 31, 2020, and that the banks have been asked to restructure their existing debts.
"We have also requested the banks to sit with the stressed MSMEs at the branch level and work it out with them to see how best they can come out of that situation and if even that means infusion of liquidity."
To make sure that more credit reaches the end-consumer, including individuals and farmers, the ministers and members of parliament (MPs) of that area will be deputed to attend the programmes being held for loan distribution and report to the Minister of State of Finance Anurag Thakur, who will look after this scheme, Sitharaman said.
For every one existing customer who wants a loan, banks will have to bring five new customers for loans, the FM told the bankers. "We don't want banks to recycle loans with existing customers as it happened in Mudra loans initially. Banks will be encouraged to include new retail customers for lending," Sitharaman said.
The finance minister also reviewed the health of the public sector banks.
Sitharaman said that the liquidity situation was also discussed during the meeting. She said that the banks are working with NBFCs on the ways to improve public lending. Banks have also identified some NBFCs, which can lend to those seeking credit.
The measures to boost credit are a part of a series of announcements made by the minister in the past one month in a bid to revive the economy. The Gross Domestic Product (GDP) growth fell to a six-year low of 5% in the April-June quarter of the current financial year.
Earlier in the day, Sitharaman defended her handling of the economy by saying that she had been working on the measures to revive growth.
"As Finance Minister-you might've observed-I've been working on and regularly speaking about measures we've been taking on matters of the economy," she tweeted in response to Biocon chairperson Kiran Mazumdar Shaw's tweet asking why the finance minister was announcing the ban on e-cigarettes instead of the health minister doing it. Shaw also wondered why the minister had not announced "some fiscal measures to revive the economy".
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