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Govt asks PSU banks to pump in Rs56,000 cr more

Govt asks PSU banks to pump in Rs56,000 cr more
PTI
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First Published: Sun, Jan 04 2009. 10 32 PM IST

 More sops: Finance secretary Arun Ramanathan. BM Meena / PIB
More sops: Finance secretary Arun Ramanathan. BM Meena / PIB
Updated: Sun, Jan 04 2009. 10 32 PM IST
New Delhi: The government has directed public sector undertaking (PSU) banks to lend Rs56,000 crore in the next three months over and above their existing disbursement target.
Beyond March, the banks would be asked to further step up lending as the government plans to infuse, over the next two fiscals, Rs20,000 crore, thus enhancing banks’ loan disbursement capacity.
More sops: Finance secretary Arun Ramanathan. BM Meena / PIB
“We have three months more... We have enhanced the original (bank’s credit disbursal) plans by Rs56,000 crore. So we are planning to provide, in addition to the earlier plans, over Rs56,000 crore,” said finance secretary Arun Ramanathan.
The additional lending would be around 20% of the credit disbursed by all commercial banks during the first nine months of this fiscal. Banks have disbursed about Rs2.75 trillion to the non-food sector up to 19 December.
The target enhancement will benefit all sectors, including real estate, corporate, small and medium enterprises and non-banking financial companies, said Oriental Bank of Commerce executive director S.C. Sinha.
The decision of the government follows the announcement of the Reserve Bank of India (RBI) to further reduce the key policy ratios and rates to unlock more bank funds and signal a soft interest rate regime to neutralize the impact of the global financial turmoil on the economy.
RBI has, since October, released Rs3.2 trillion into the system, but unless the banks shed their reluctance to lend, the benefits will not reach industry.
The reduction in reverse repo, the interest that banks earn by parking their funds with RBI, by 100 basis points will prompt the banks to look for borrowers to earn higher returns, Sinha said.
Acknowledging that the credit flow has slackened during October and November, Ramanathan said advances by the PSU banks have picked up in December.
The government, he added, has asked PSU banks to enhance their credit expansion plans to ensure that productive sectors get adequate credit.
At the same time, the government will closely monitor the provision of the sectoral credit by the state-owned banks on a fortnightly basis.
In addition to this, the government has drawn up a Rs20,000 crore recapitalization plan for the next two years to ensure that the banking system does not suffer from capital adequacy constraints.
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First Published: Sun, Jan 04 2009. 10 32 PM IST