The government of India is leaving no stone unturned to ensure that the country’s economic growth is brought back on track. Days after he interacted with industry leaders, Prime Minister Narendra Modi on Thursday met stakeholders from the banking and non-banking financial companies (NBFCs) sector.
During his interaction with top honchos, PM Modi emphasised on how a country’s economic growth is supported by the banking system. The Prime Minister also spoke in great detail about small entrepreneurs, self-help groups (SHGs) and farmers and said that they must be motivated to use institutional credit to meet their needs in light of the choked credit flow as a result of the nationwide lockdown.
A lion’s share of the Centre’s Rs 20 lakh crore-financial aid package was allotted to banks. The PM asked leaders of India’s top banks to pass on the benefit of this allocation to consumers who are dealing with the pandemic and repeated lockdowns at the same time.
In addition, Prime Minister Modi also assured bankers of the government’s support and told them that the dispensation will take any steps necessary to support the banking sector and promote its growth. While bankers appreciated the gesture, they apprised the PM about ground realities in the agricultural and MSME (Micro Small and Medium Enterprises) sectors. Many industry leaders who were part of the interaction suggested loan restructuring as the way forward.
A number of reports in recent days have pointed out that banks in India are risk averse and this leaves the MSME sector high-and-dry at this time of crisis.
It is important to note that the PM’s interaction with bankers was not out of the blue. Just 48 hours ago, Reserve Bank of India (RBI) Governor Shaktikanta Das also discussed various key issues with top honchos of the banking and NBFC sectors.
RBI Governor’s interaction with banking, NBFC leaders
Chairman of HDFC, Deepak Parekh in his interaction with the RBI Governor highlighted the need for loan restructuring he suggested would help firms in the long run and equip them to tide over the next few quarters. Parekh, however, requested the central bank not to extend the payments moratorium beyond August 31. He suggested that those who can afford to pay back the banks are exploiting the situation for financial gains, a move that is straining lenders.
Rakesh Bharti Mittal, vice-chairman of Bharti Enterprises’, on the other hand, stated that an extension of the moratorium must be considered to alleviate financial stress looming over corporates and the economy.
Ensuring stable credit growth discussed during interaction with PM
The discussion between industry leaders and PM Narendra Modi revolved around the need for banks to introspect practices to ensure stable credit growth. Government officials urged banks not to treat all proposals with the same yardstick while asking them to distinguish and identify bankable proposals to ensure that they get access to funding on their merit and do not suffer in the name of past NPAs.
India has built a robust, low-cost infrastructure that enables every Indian to undertake digital transactions of any size with great ease. Banks and financial institutions were asked to actively promote the use of RUPAY and UPI amongst its customers as it would also boost the Centre’s ‘Aatmanirbhar Bharat’ scheme.
Progress of initiatives such as the emergency credit line for MSME, additional KCC cards (Kisan Credit Cards), liquidity window for NBFC and Money Flow Index (MFI) was also reviewed. While it was noted that significant progress has been made with respect to most schemes, banks need to be proactive and actively engage with intended beneficiaries to ensure that the credit support reaches them in a timely manner during this time of crisis.
Following his interaction with industry leaders and stakeholders, Prime Minister Narendra Modi had said in a tweet, “Had an extensive interaction with stakeholders from banks and NBFCs to deliberate on the roadmap for economic growth, helping entrepreneurs and a range of other aspects.”
This was the second occasion within a span of one week when the government sought bankers’ opinion on the current situation and urged them to loosen their purse strings to give the economy a fillip. Apart from PM Modi, those present in the meeting included Union Ministers Piyush Goyal, Nitin Gadkari, S Jaishankar and SBI Chairman Rajnish Kumar among others.