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Sitharaman says banks gave out over Rs 81,000 crore in 9-day loan mela

Finance Minister Nirmala Sitharaman said banks have sufficient liquidity, and efforts were on pass on money to MSMEs from large corporates.

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New Delhi: The Finance Ministry on Monday said loans worth Rs 81,781 crore were disbursed during the nine-day outreach programme or loan mela organised by banks that began on October 1.

After meeting heads of the public sector banks (PSBs), Finance Minister Nirmala Sitharaman said the banks have sufficient liquidity, and efforts are being made to ensure that due payments are released to micro, small and medium enterprises (MSME) by large corporates.

In order to ensure liquidity for small businesses, Sitharaman said banks have been asked to provide bill discounting facility to the MSME sector against payments due from the large corporates.

Speaking at the occasion, Finance Secretary Rajiv Kumar said the outreach programme was conducted before Durga Puja and in those camps, from October 1-9, an amount of Rs 81,781 crore was disbursed.

“The government has strengthened all public sector banks who are very very robust now, so therefore they are also coming forward to extend it in outreach mode. New term loan was Rs 34,342 crores. There was sufficient demand which was seen at the ground level for housing for personal loans for small loans,” he said.

He also said the second outreach programme will start from October 21 to October 25.

“The assessment of bankers remain that liquidity is sufficient. They are ready to lend to genuine borrowers within the prudential norms be it corporate, MSME or retail. Banks have sufficient capital, they are meeting their regulatory norm, their outreach is there and whichever sector is in need of the money within the norm, they will get the money,” he said.

According to returns filed by the large corporates to the Ministry of Corporate Affairs, as much as Rs 40,000 crore is due to the MSME sector, Sitharaman said, adding all efforts will be made to ensure that MSMEs get their dues ahead of Diwali.

India will celebrate the festival on October 27.

With regard to partial guarantee scheme, Economic Affairs Secretary Atanu Chakraborty said to ensure that NBFCs get adequate liquidity, a pool of assets with non-banking financial companies is proposed to be bought out by banks. It is backed by first loss of government guarantee of up to 10 per cent.

Banks have expressed that rating requirement to be brought down to investment grade, he said, adding the Department of Financial Services (DFS) will issue clarification shortly.

On merger, the finance secretary said amalgamation process of 10 PSBs into 4 is going on as per the schedule.

All 10 banks have got in-principal board approval for the merger and it has been sent to the Reserve Bank of India for consultation, he said, adding effective date for merger will be announced in consultation with the RBI.

Meanwhile, Punjab National Bank, Oriental Bank of Commerce and United Bank of India held their respective Town Hall meetings, which were addressed by respective CEOs.

During the meeting, it was emphasised that the outreach would be without any dilution in diligence or underwriting standards.

It was noted in the review that PSBs have continued to support the NBFC/HFC sector.

Since the IL&FS default in September 2018 till October 10 2019, PSBs have sanctioned total support of Rs 3,97,557 crore in the form of credit as well as pool-buyouts of Rs 1,07,792 crore, including Rs 15,455 crore under the newly launched Partial Credit Guarantee Scheme.

Disbursement by PSBs to NBFCs has been Rs 39,068 crore from the last review on September 19, 2019 till October 10, 2019.

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  1. As a person who has lived during Indira Gandhi’s regime, I am alarmed when I see the words “Loan Melas”. During the hey days of bank natinoalisation, in 1970s, PSU banks were lead by the madman Janardhana Pujari. He started loan melas for small borrowers, which amounted to anywhere between Rs.2000 to Rs.10,000. The loan could be got only through a Congress Worker. Only 40% of the money reached the borrower, with the assurance that he need not re-pay the sum. Thus started the story of NPAs in India in the defaults of large number of small borrowers. Now, what will happen to the lending in this Melas under the approving eyes of the FM? Story is only marginally different from that of 1970s – the borrowers are startups, small enterprises and MSMEs. Can banks really service the huge number of small borrowers? Is it cost effective for the banks? Or, are the banks throwing good money after the bad money? As a bank customer, I have a right to worry.

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