File photo of Finance Minister Nirmla Sitharaman | Praveen Jain | ThePrint
File photo of Finance Minister Nirmla Sitharaman | Praveen Jain | ThePrint
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New Delhi: The Indian economy is at a stage where every sector is trying to beat the pandemic and revive, Finance Minister Nirmala Sitharaman said Saturday, stressing that the government is open to providing help to those who need it.

Reiterating that the government is keeping all its options open, Sitharaman said at a press briefing that the Reserve Bank of India’s (RBI) liquidity support measures have helped the economy. 

However, she pointed out that given the uncertainty around the pandemic, a complete picture about the economy is yet to emerge.

Credit flow to different sectors of the economy is also picking up, she said, while pointing out that the improvements should reflect in the credit flow numbers of the last few weeks.

The Indian economy is headed towards a contraction in the current fiscal with many economists forecasting that the contraction could be as much as 10 per cent.

A two-month lockdown to halt the spread of the novel coronavirus brought economic activity to a complete halt, leading to large-scale job losses and shutting down of small businesses. 

The government and the RBI together have announced measures totalling more than Rs 21 lakh crore, but mainly in the form of liquidity support prompting many to point out that more needs to be done. 

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Also read: India should spend more to revive demand, not worry about deficit: Economy expert Martin Wolf

Bank lending rates are as low as 6.65%

The government is also hopeful of better transmission of the lower interest rate by banks to the borrowers. The issue has also been raised in the meetings of the finance minister with state-run banks in the last few months. 

The finance ministry has been nudging banks to lower interest rates to borrowers in line with the 135 basis point rate cut by the RBI since February this year.

Now with banks using the external benchmark lending rate (EBLR), the transmission is relatively faster. This is because banks have to reset their EBLR within three months of a rate cut.

Debasish Panda, Secretary, Department of Financial Services, who was also present at the briefing, said that there is significant interest rate transmission pointing out that the bulk of the loans lent by state-run banks is at rates as low as 6.65 per cent.

Even for existing loans, banks like State Bank of India are allowing a reset of the loans every 6 months instead of the earlier practice of resetting loans every 2 years, thereby benefiting the borrowers, he said.

Also read: Modi govt move to ‘dilute’ bankruptcy law led to our rift, RBI ex-governor Urjit Patel says


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