New Delhi: Finance minister Nirmala Sitharaman on Thursday said the economy will start looking up in the second half of the current financial year as consumption rises and banks increase their lending operations.
Weeks after meeting public sector bankers, the finance minister met heads of leading private sector lenders and financial institutions. They categorically told the finance minister that there is no liquidity crisis and there is enough demand for loans.
To cash in on the festive demand, Sitharaman urged the lenders to join the outreach programme in 400 districts to push lending and boost consumption.
After meeting the top management of 29 leading private sector financial institutions, she said, “On the whole, it was a tonic-like meeting where I have heard a lot of good things, positive things and not one voice said there is a concern, there is a shortfall of demand but to my surprise…none of them voiced liquidity concerns.”
She said economic slowdown seems to have bottomed out and the coming festive season will help the economy start looking up. The GDP growth in the first quarter of the current financial year slipped to an over six-year low of 5%.
“Things are looking forward and upward. That is why I started by saying it was like tonic for me and I hope this message goes across…The message that I get from this meeting today is consumption is happening,” the minister added.
During the upcoming festival season, the demand will pick up, she said.
“From what has emerged today I think demand will get back and motivate our economy to move at a faster rate… in the coming half year things will have to look up…,” she added.
The minister further said the lenders of private sector banks and financial institutions told her that the slump in commercial vehicle sales is “cyclical” and likely to pick up in the next one or two quarters.
As regards slowdown in the passenger vehicle segment, she was told that it was driven by “sentiments” and will improve in near future.
Financial Services Secretary Rajiv Kumar said public sector banks will hold outreach programme in 400 districts across the country during the festival season with a view to enhance credit disbursal.
In the first phase between October 3 and 7, 250 districts will be covered and remaining districts will feature in the second phase which will begin from October 11 and last till Diwali.
Private sector banks have also been invited to join the outreach programme.
During the meeting, banks and non-banking financial companies (NBFCs) also suggested the limit for affordable housing eligibility be raised to Rs 50 lakh from the current Rs 45 lakh.
Noted private banker Uday Kotak, who also attended the meeting, said private investment will respond to the reduction in corporate tax. He said most banks will follow external benchmark-based lending from October 1.
Kotak said private sector lenders would very much like to contribute to the customer outreach and double their lending efforts over the next 30 to 60 days.
“We believe in one country one financial system. this is an opportunity for us to do what is our ‘dharma’. It provides opportunity to grow our business through the outreach programme,” Kotak added.
Some of the lenders have stressed the need for self declaration of present address in respect of borrowers who are eKYC authenticated to enable hassle-free lending and ease in co-origination of loans by banks and NBFCs.
The finance minister assured them that appropriate instructions would be issued to address the concern by October 1.
On the issue of restriction imposed on Punjab & Maharashtra Cooperative (PMC) Bank, the finance minister said the RBI as a regulator is handling it at this stage and also provided some relaxation.
“I don’t think I’ll get into this at this stage. Will wait, let there be some kind of comprehensive picture emerging post which certainly government will have to see what best can be done…,” she said.
The government’s intention is to have a stable environment, she added.
In a major relief to the hapless customers of crippled PMC Bank, the Reserve Bank on Thursday increased cash withdrawal limit to Rs 10,000 per account from Rs 1,000 set earlier over the next six months.