Finance Minister Nirmala Sitharaman chaired a review meeting with heads of public sector banks (PSBs) to assess their readiness to tackle possible disruptions due to the third wave of the Covid-19 pandemic. Sitharaman also held discussions with the Reserve Bank of India (RBI) Governor Shaktikanta Das, Department of Financial Services Secretary Debasish Panda on post-pandemic economic recovery and preparedness of PSBs.
In a meeting held virtually, SItharaman also reviewed steps taken by public sector lenders in implementing pandemic-related measures initiated by both the Centre and the Reserve Bank of India (RBI).
The RBI had announced several measures to improve access to credit for emergency healthcare services, lending to microfinance institutions (MFIs), and micro, small and medium enterprises (MSMEs), among others. The Centre had also announced a host of measures for Covid-19 affected sectors battered by the second wave of the pandemic. These included Rs 1.1 trillion loan guarantee scheme for Covid-19 affected sectors, additional Rs 1.5 trillion for Emergency Credit Line Guarantee Scheme (ECLGS), credit guarantee scheme to facilitate loans to 25 lakh persons through MFIs, among others.
Of the extended limit of Rs 4.5 trillion under ECLGS, 64.4 per cent or Rs 2.9 lakh crore was sanctioned by public and private sector banks up to November 2021. “Over 13.5 lakh small units survived pandemic due to ECLGS, saved MSME loans worth Rs 1.8 trillion from slipping into non-performing assets, and saved livelihood for approximately 6 crore families,” said a statement by Ministry of Finance.
Under the Credit Outreach Programme launched in October 2021, during the festive season, PSBs sanctioned an aggregate loan amount of Rs 61,268 crore.
During the review, Sitharaman told bankers that the credit demand is expected to pick up on account of growth in retails segments, improvement in overall macroeconomic prospects, and improving financial health of borrowers. Bankers pointed out that PSBs have observed an improvement in the repayment culture in the country.
PSBs have performed well and provided the required impetus to the economy to emerge from the shackles of pandemic induced stress with the support from various policy measures. Bankers also told the Finance Minister that state-owned lenders are adequately capitalised and prepared for any stress scenarios in future.
Sitharaman told bankers that the business outlook is progressively improving despite headwinds from global developments and the spread of the Omicron variant. However, she told bankers that contact-intensive sectors may require more support to fight the pandemic.
The ongoing third-wave of the Covid-19 pandemic due to the highly infectious Omicron variant has led to many state governments announcing curbs that include night curfews and weekend lockdowns. The spread of Covid-19 infections and its impact has resurfaced concerns over India’s economic recovery. On Thursday, India Ratings lowered India’s GDP growth projection for January-March 2022 by 40 basis points (bps) to 5.7 per cent. For FY22, the ratings agency has revised its growth forecast by 10 bps to 9.3 per cent.
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