Loan  melas  to  return in Oct as govt nudges banks to push credit

State-run banks will conduct the second round of the so-called loan melas to boost credit flow to retail borrowers and small businesses during the festive season, finance minister Nirmala Sitharaman said on Wednesday, as the government seeks to lift weak private consumption and economic growth.

Sitharaman first nudged lenders to reach out to customers and signal their willingness to lend during the festive season in September 2019. That year, the loan melas were conducted in October across 250 districts to make credit easily available during the festive season.

The programme was part of measures to boost demand amid concerns about tepid economic growth.

The government is again pushing banks to expand their lending programmes, despite sluggish demand, and is boosting spending on infrastructure projects to accelerate economic recovery after the country was ravaged by two waves of coronavirus infections.

“In order to keep up the momentum of the stimulus we are giving, we have also asked the banks to go out there and give credit to people who want to borrow,” she told reporters after meeting heads of public sector banks.

In the previous round, the finance ministry claimed that state-run banks disbursed loans worth ₹2.39 trillion in November to non-bank lenders, large and small businesses, as well as farmers, and ₹2.52 trillion in October, for a total of ₹4.91 trillion in the two months.

“This year, too, sometime in October, there will be credit outreach in every district of the country,” she added.

Asked if the tepid loan growth despite a plethora of schemes indicated a lack of credit demand, Sitharaman said it was too early to come to a conclusion.

“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.

Non-food credit grew 6.17% as of 30 July from a year earlier, data from the Reserve Bank of India (RBI) showed.

While bankers blame it on the 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 asked banks to look into the credit requirements of sunrise sectors.

Fintech, she said, is an area where banks have done quite a lot of work, and it is a sector that requires a lot of assistance. That apart, she said banks were requested to come up with specific plans for the northeastern states.

“There is a matter of concern that banks have recognized. In eastern states such as Odisha, Bihar, Jharkhand and somewhat even West Bengal, where current and savings account deposits are piling up, banks should now give the facility of greater credit expansion,” Sitharaman said.

Collectively, public sector banks have all done well, she added.

Meanwhile, the government has decided to remove the cap of ₹9,284 for PSU bank family pension and has put a uniform limit of 30% of the salary drawn.

Department of financial services secretary Debasish Panda said on Wednesday that the earlier scheme had slabs of 15%, 20% and 30% of the pay that the pensioner drew at that point in time and was capped at ₹9,284.