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In a move to boost private consumption and economic growth, finance minister Nirmala Sitharaman announced that the public sector banks will conduct loan melas during the festive season. This move is aimed to give a push to credit flow to retail borrowers and small businesses during the festive season.
In September 2019, Sithraman had asked lenders to reach out to customers and showcase their willingness to lend during the festive season. Across 250 districts, the loan melas were conducted to make credit available.
Despite the slow demand, the government has decided to bring the lending programme back. After the country was ravaged by the Covid pandemic, the government is boosting spending on infrastructure projects to accelerate economic recovery.
On August 25, Sitharaman addressed the media and said that the government has asked the banks to give credit to people who want to borrow, in order to keep up the momentum of the stimulus.
The finance ministry hs said that in the previous round the PSBs disbursed loans worth Rs 2.39 trillion in November to non-bank lenders, large and small businesses, as well as farmers, and Rs 2.52 trillion in October, for a total of Rs 4.91 trillion in the two months.
The credit outreach in every district of the country is expected to begin again in October 2021, Sitharaman informed.
“We have been addressing credit requirements of small and medium businesses in particular in various ways. Banks have shown extreme nimbleness in reaching out. I am telling banks to go ahead with credit outreach from October. I do not think it is time yet to conclude that there is no credit pick-up,” Sitharaman said.
The bankers have observed a lack of demand and stronger credit underwriting Analysts believe it is a mix of that and banks’ reluctance to lend. However, banks expect demand for credit to witness an uptick as economic activity revives.
The finance minister said she has asked banks to look into the credit requirements of sunrise sectors also.