Finance Minister of India, Nirmala Sitharaman announced infusion of upfront capital of around Rs. 70,000 crore in the public sector banks in order to boost the lending business and improve the liquidity crunch situation in the market.
This decision is supposed to generate additional lending and liquidity in the Indian financial system to the tune of Rs. 5 lakh crore.
The finance minister also said that the banks have decided to pass on the RBI rate cut benefits to borrowers through MCLR reduction.
Banks will release repo rate and external benchmark loan products that will guide to reduced easy monthly installments for housing, vehicles and other retail loans, said Sitharaman.
She also said, “Working capital loans for the industry will also become cheaper.”
She also said that public sector banks will ensure the mandatory return of loan documents within 15 days of loan closure in order to reduce harassment and bring in greater efficiency. This will benefit borrowers who have mortgaged assets.
Various sectors were vocal about the stimulus packages for some time to overcome this crisis of economic slowdown.
Sitharaman addressed the press in the middle of the increasing concerns over the ongoing economic crisis in the country. The NBFC crisis lies at the heart of the current slump- with fund squeeze paralyzing industries ranging from Automobile to FMCG.
She also said that the Housing Finance Companies will also get an additional Rs. 20,000 crore from the National Housing Bank. The fund to the NHB has been increased to Rs. 30,o00 crore up fro the Rs. 20,000 crore.
She announced a Partial Credit Guarantee Scheme for the purchase of pooled assets of NBFCs and HFCs up to Rs. 1 lakh crore, which
Housing finance companies will now get an additional Rs 20,000 crore from the NHB. NHB’s funding has been raised to Rs. 30,000 crore up from Rs. 20,000 crore, said Finance Minister.
Finance Minister also announced a scheme of Partial Credit Guarantee for the purchase of pooled assets of HFCs and NBFCs up to Rs. 1 lakh crore, which will be monitored at the top level in every bank.
These low number regarding the growth are not surprising given the economic crisis. The spending of the customer on everything from hair oil to biscuits have dropped as concern about job losses grow with car manufacturers shutting down the production. A shadow banking crisis has also weighed on private consumption which accounts for around 60 percent of the GDP.
In a move to address the crisis in the sector, the government came up with a solution of where Public sector banks would purchase high-rated pooled assets of financially sound NBFCs, amounting to a total of Rs. 1 lakh crore during the going financial year.